HOME BUYERS FAIR : Getting IN : How First-Time Owners Can Buy Into the Dream : Starting Out: Many things have changed about the way we buy homes, but the tax advantages, plus profit possibilities, make it worth effort to overcome obstacles.

Dick and Jane had fun in their house in the suburbs, with Father (who carried a briefcase), Mother (who wore an apron) and baby Sally (who laughed at funny Spot and Puff). You just knew that they owned that home, and that Father was paying off the mortgage as quickly as he could.

First-graders spend little time with that fictional family nowadays, and the same goes for real estate agents--too much has changed:

Mother may be out there building a career (more than half of today’s mortgages involve two-earner families). Baby Sally is gone (household size has shrunk). Neighbors may look different (one home buyer in four is single, and unrelated persons commonly buy houses together).

When you own your own home you can play the piano at midnight, keep a dog (keep two dogs!), make a garden, put nails in the walls wherever you want, use your own washer and dryer.

Buying a house confers what everybody wants: a retreat from the pressures of an increasingly crowded society, a place for self-expression, a hedge against inflation and a method to reduce taxes.

It takes just three things to buy a house:

--Some cash.

--Dependable income.

--Good credit.

If you’re lacking any of those three, there is no need to despair. Home ownership is still possible. There are techniques for overcoming each problem.

Just be sure to level with your real estate agent about your financial problems. A competent agent can recommend an appropriate financing strategy for your situation.

Federal tax reform in 1986 left homeownership as one of the few remaining tax shelters. As before, property taxes on one’s home and even on vacation property are completely deductible. Interest paid on up to $1 million in loans to acquire or improve a home (or two homes) is still deductible--and that more than covers most of us.

As the value of one’s property rises over the years, additional borrowing of up to $100,000 in equity loans, refinancing or second mortgages also qualifies for federal tax deduction.

That means a homeowner in a 28% tax bracket has Uncle Sam paying almost 28% of his or her monthly payment, with deductible property taxes and interest forming almost the whole of the payment in the first few years of the loan. Uncle’s contribution will show up in the form of lower income tax owed or unexpected income tax refunds.

In addition, your profit when you sell your primary residence qualifies for several delightful income tax breaks. If you replace your home with another of equal or greater value within two years (before or after the sale of the first), tax on your profit is postponed indefinitely. (If you buy a less-expensive replacement, some of your profit is immediately taxable, the rest qualifies for roll-over postponement.)

You can repeat this process any number of times, piling up untaxed profits on a string of homes, and then, any time you are 55 or older, you can take advantage of a one-time tax exclusion that allows you to keep up to $125,000 of your resale profits tax free. And that exclusion can include untaxed profit on previous homes.

Besides the tax saving, in most areas you can expect some increase in the value of your home, the additional return on your investment known as equity buildup.

Localities vary: Brokers can estimate what might happen in your area over the next few years. If you could conservatively expect the value of a house to increase by $6,000 in the next year, that would justify up to $500 a month more in mortgage payments.

Equity represents the amount you’d have if you sold your home and paid off the liens (financial claims) against it--usually, the mortgage. If you buy a $120,000 house with $25,000 down and a $95,000 mortgage, your equity, the day after you move in, is $25,000. Equity is the money you’ve got invested in the house.

If the house goes up in value a conservative 5% in the next year, and your debt is paid down by a paltry $1,900 that first year, your equity has grown to $32,900 (market value, $126,000 less remaining debt, $93,100).

Equity buildup assumes, of course, that the value of real estate rises, a variable factor nationwide. In fact, never since the Great Depression of the 1930s have values around the United States seen such wide variances as they did at the end of the 1980s.

One survey of 150 metropolitan areas in 1987 found prices dropping in 25 cities, rising in 125 others. So the odds are with you. Overall, the United States experiences gradual growth in real estate prices every year, usually outstripping general inflation.

First attempts at house-hunting often trigger bewildering--and misguided--advice from parents, grandparents and others who remember what things used to be like.

“You can’t be looking carefully. Some broker’s taking you for a ride. Why, we only paid $9,500 for this house, right after your father came back from the war,” says a mother stunned by the prices her son reports in a Sunday phone call.

“Somebody’s telling you all wrong, saying you should buy with such a small down payment. You tell that husband of yours Gramps says to wait a few years until you’ve saved up some more money,” says a grandparent with painful memories of the Great Depression.

The solid old-fashioned virtues of denial and thrift, however, no longer reward the home buyers. The old techniques have some drawbacks in inflationary times. Houses keep going up in price faster than would-be buyers can accumulate a larger down payment. Meanwhile, they lose out in tax benefits, and their rent is probably raised too.

If you can’t find your dream house, or can’t afford it today, your best bet is to buy whatever you can, as soon as you can, however you can. When you finally locate the perfect house, you’ll have something to trade in on the deal, a house in the same market area that’s kept pace with whatever is happening.

To prepare to buy your home:

--Start reading classified ads in the real estate section of your newspaper. Visit open houses on the weekends--all this even though you’re not ready to buy yet.

--If you’re a veteran, send for your VA certificate of entitlement, just in case you eventually applying for a VA mortgage.

--Go to the local credit bureau and pull an inexpensive report on yourself, just to make sure no mistakes will turn up.

--Sock away extra cash; you’ll be motivated to skip a vacation or a movie when you have a short-term goal such as accumulating money for a down payment and closing costs.

--Don’t buy anything on credit. This is not the time to take on another car payment, buy a boat, or even apply for an additional credit card.

From the book “The Complete Homebuyer’s Kit” by Edith Lank, copyright 1989 Longman Group U.S.A. Inc. Reprinted by permission of the publisher, Longman Group U.S.A. Inc.

INCREASE IN FIRST-TIME HOME BUYERS States recording the largest percentage increase in first-time buyers, 1988-1989

Rhode Island: 11.3 New Hampshire: 8.4 Connecticut: 7.4 Massachusetts: 5.6 Mississippi: 5.6 New Jersey: 4.7