For prospective homeowners, it's hard to ignore the sales pitch: Home values nationwide have fallen on average some 20%, while mortgage rates are hovering around a 28-year low.

According to the Standard & Poor s/Case-Shiller Home Price Indices, existing single-family home prices are back to their March 2004 levels, with values for single-family homes down more than 23% in 20 cities as of October. Meanwhile, the average interest rate on a 30-year fixed-rate mortgage is 5.01%, down from 5.87% from about a year ago, according to Freddie Mac. And once popular 5/1 conforming adjustable rate mortgages currently carry a rate of 5.49%, down from 5.63% last year.

While home prices are likely to fall even more, mortgage rates may have reached their lowest point, says Stu Feldstein, president of SMR Research, a Hackettstown, N.J.-based financial services research firm.

Just because lenders are offering such favorable rates doesn't mean they'll go easy on prospective homeowners, though. House hunters need to have a credit score of at least 660 to 680 and be prepared to make a down payment of 20% or more, says Feldstein.

For those who fit the bill, here are four tips for getting an even better deal on a home:

Haggle

Given the glut of homes on the market, prospective home buyers shouldn't be afraid to low-ball an offer or, for that matter, negotiate other perks such as having the seller pay for closing costs or requesting the washer and dryer come with the home.

Before making an offer, find out how long the house has been on the market and why the seller is moving. That way you can gauge the seller's willingness to negotiate. If the house has been on the market for at least eight months, the seller will probably be more prone to lowering their asking price, says Feldstein. Likewise, if the seller is eager to move -- say they need to relocate for a job or they're about to have another child -- they will probably be more flexible on price.

Shop Around for Rates

To land the lowest mortgage rate possible, get at least three competitive bids from lenders, says Danielle Babb, a real estate analyst and professor of economics and statistics at Northcentral University in Arizona.

Be prepared to show income, asset and employment verification, including copies of your 1040 forms from the past couple of years, pay stubs, bank statements and even your employer s phone number. The more paperwork you provide the less risky you appear to the lender, which will be more likely to refrain from tacking more fees or points onto your mortgage.

Tap Into New Tax Benefits

Buy a house no later than June 30 and you may qualify for a new tax credit that at most equals the lesser of 10% of the home price or $7,500 ($3,750 if you are married, but filing separately).

You can claim this credit on your 2008 1040 form. Any amount that remains after the credit is used will go toward offsetting your federal income tax bill. There are, however, several caveats. You re only eligible if you haven't owned a principal residence in the U.S. during the three-year period leading up to the purchase date. And, you'll have to repay the credit over 15 years. So, say you claim the credit on your 2008 tax return, you ll have to start repaying it with the 2010 tax return. In short, the perk to this credit is that it functions like a temporary, no-interest loan.

Choose a Location That's Likely to Rebound

Before you make an offer on a house, consider where it's located and how that location will affect its value in the near and long term.

Houses in cities and towns that haven t been hit very hard by foreclosures are likely to see their value increase much faster when the real estate market recovers than areas flooded with "for sale" signs and foreclosures. Foreclosed homes sell for anywhere between 30% to 70% of their value, and that keeps the value of the homes in the area from rebounding, says Babb.