Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.

“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio.

Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:

1. Large kitchens with islands
2. Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows.
3. Home offices
4. Main-floor master suite
5. Outdoor living space
6. Ceiling fans
7. Soaking tub in the master suite and/or an oversize shower with a seating area
8. Stone and brick exteriors rather than stucco or vinyl
9. Community walking paths and playgrounds
10. Two-car garages, but three-car garages are even more desirable

The housing market, and with it the mortgage landscape, have changed dramatically over the past two years.

Rules for scoring a low-interest mortgage have become stricter, and homebuyers must be savvy and well-prepared to land any home loan. Below are 10 tips to make your homebuying or refinancing odyssey more successful in 2010.

1. Consider an adjustable-rate mortgage.
In late 2009, one in 20 borrowers was obtaining an adjustable-rate mortgage. As mortgage rates rise in 2010, the proportion of ARM borrowers is expected to grow.

The most popular adjustable is the 5/1 ARM, which carries an introductory rate that lasts five years, and then can change annually thereafter. Typically, the introductory rate on 5/1 ARM is lower than the rate on a 30-year fixed. That makes the 5/1 ARM a viable option for borrowers who are sure they will sell their homes within five or six years, before the monthly payments have a chance to skyrocket.

A fixed-rate mortgage is probably the safest option for homebuying. But for people who plan to sell their homes within a few years, a hybrid ARM is worth considering.

2. Get your loan early in the year.
The Federal Reserve plans to stop buying mortgage-backed securities by the end of March. Most mortgage experts believe that rates will rise when mortgages go off Fed support, as private investors require higher rates to compensate for the risk.

3. Know your credit.
As the mortgage world goes back to basics, good deals require high credit scores. Until recently, it took a credit score of 720 or higher to get the best combination of fees and points. Now the best homebuying deals go to borrowers with credit scores of 740 or higher.

4. Ask for three or four loan scenarios.
Instead of focusing only on the interest rate, consider more than two combinations of discount points and loan type.

Let's say your best guess is that you'll live in the house for eight years. Compare the total fees and monthly payments that you would make under three or four different loan deals. Ask yourself how much it would cost to pay zero discount points and get a higher rate compared with paying discount points in exchange for lower rates. What about a 5/1 or 7/1 ARM?

5. Refinance for the remaining term.
When refinancing a 30-year mortgage, too many people start from the beginning again. When you refinance a 30-year loan that you've had for five years, pay off the new loan in 25 years. Just ask the lender to amortize the loan for the remaining period of the old loan. 

6. Know your numbers.
The housing boom busted more than three years ago, and still people are tempted to take on too much debt. Let the Federal Housing Administration be your guide for homebuying.

The FHA caps borrowers' house payments at 31% of gross (pretax) monthly income. So, if you earn the median household income of $4,200 a month before taxes, your house payment, including principal, interest, taxes, insurance and association dues, should be no more than 31% of that, or $1,302. Some housing counselors say you should spend less — around 28% to 30% of gross income.

The FHA limits total debt payments to 43% of monthly income. Total debt payments include first and second mortgages, auto loans, credit cards and child support. Some non-FHA loans let you borrow more, but you shouldn't have to stretch.

"Expectations to grow into a payment ought to be scaled back until the economy is into a full recovery," says Jim Sahnger, mortgage planner for Palm Beach Financial Network in Stuart, Fla.

7. Small down payment? Go FHA.
Most lenders require buyers nowadays to make down payments of at least 10%. Similarly, most lenders require homeowners to have at least 10% equity to qualify for a low-rate refinance.

For people who don't have the 10%, the FHA is an option. To get an FHA-insured mortgage, you need a down payment, or equity, of at least 3.5%.

8. No down payment? Go VA or RHS.
The Department of Veterans Affairs guarantees no-down payment mortgages in the VA Guaranteed Home Loan Program. To meet eligibility requirements, you must provide proof of military service.

The U.S. Department of Agriculture's Rural Housing Service doesn't require down payments, either. The eligibility requirements include restrictions on income as well as property location.

9. Check rates on jumbos.
Jumbo mortgages were a casualty of the credit crisis that began in the summer of 2007. Jumbo rates soared and remained high for more than two years. But at the end of 2007, rates on jumbo mortgages began falling. Toward the end of 2009, rates on fixed-rate, 30-year jumbos dropped to around 6%. Jumbo ARM rates also fell. For homeowners with at least 20% to 30% equity, refinancing is worth a look.

10. If you fall behind, consult a counselor.
Delinquent borrowers who receive foreclosure counseling are 60% more likely to keep their homes than people who don't get counseling, according to NeighborWorks America. They also are more likely to receive mortgage modifications and lower payments.

 

Fannie Mae is offering a 3.5% incentive for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing properties listed on HomePath.com that are closed within this period may receive up to 3.5% of the final sales price for:

 

·         Closing costs;

·         The purchase of new Whirlpool^® appliances by Fannie Mae; or

·         A mix of closing costs and appliances, at the buyer's discretion, up to the maximum 3.5%.

To be eligible for this incentive:

·         Offers must be accepted on or after January 28, 2010;

·         Property sales must close before May 1, 2010, and;

·         Buyers must be owner-occupants (investors are excluded).

 

The incentive reinforces the organization's commitment to stabilizing communities and assisting buyers. For more information about this incentive, visit www.HomePath.com, read the press release on fanniemae.com, or contact a Fannie Mae listing broker.

With the average home size declining, owners are cleverly doing more with the square footage they have.

 

Years before house staging came into vogue as a sales tool, Howard Hoffman was helping sellers rearrange their furniture to maximize floor space and enhance a home’s beauty. Hoffman, GRI, SRES®, now owns Stage & $ell, a home staging and redesign company in Indianapolis.

 

Chances are he’ll have a lot more business in the years ahead from people needing to resize their lives. With baby boomers entering retirement, young adults delaying marriage, and the economy improving by fits and starts, Americans are starting to embrace the idea that less is more when it comes to their square footage. The average size of a new house decreased last year for the first time in nearly three decades. 

 

"Home buyers have been changing," says Fran Litton, a planner with Evans Group, an architectural firm in Orlando, Fla. "They still want the luxury and toys, but they’re putting them into a smaller space."

 

Although the average square footage of a new house is still double what it was in 1960, in the last year, it decreased slightly to 2,215 square feet from a high of 2,277 square feet in 2008, according to data from the U.S. Census Bureau. While the decrease doesn’t approach mid-20th century levels, it is the first drop in house size since the recession of the early 1980s.

 

Smaller houses can mean bigger challenges for real estate professionals. "Eighty percent of people appreciate only what they can see," says Hoffman, who also works as a sales associate with F.C. Tucker Co. in Indianapolis. "You have to make sure you’re showing them what you’ve got." That means making sure each room is easily identified. "Get rid of that desk and computer in the dining room," he says. "Make sure buyers can see it’s a dining room."

 

Hoffman also advises clients to remove rugs to show off hardwood floors and take pictures off the walls. "The less the eye has to distract it, the bigger a room feels," says Hoffman. "People buy what they see. If they can’t see the floors or the walls, they won’t buy the house."

 

Interior designer Roberta Lathrop agrees. She tells her clients with smaller kitchens to clear the counters. "You can’t have all the small appliances sitting on the counter," says Lathrop, who runs Designs by Roberta in Belmont, Mich. "It will start looking very cluttered very fast." 

 

Smaller houses require owners to rethink what they have and how they use things. "If you have a smaller house, maybe you don’t need half a dozen different pans," she explains. "Maybe a single flat griddle that you can put over a couple of burners will do."

 

One of the first tasks she assigns clients is to go through their stuff—ruthlessly. "We all have too much stuff," she says. "Get rid of it. If you’re attached to an item, or think maybe you’ll need it, put it in a box and store it somewhere for six months. Then go back through it. 

 

Have you used it? Have you even missed it? If not, donate it. Get it out of the house." That goes for clothes as well, she says.

 

 

Assess Furniture Size

Removing clutter is only one aspect of getting a smaller house ready to sell—or just living contentedly in it. Some big pieces of furniture, for example, won’t fit in modestly sized houses. 

 

"Take a look at the scale of your furniture, and don’t forget depth," Lathrop says. "Things can be a lot deeper than you realize, and all of a sudden, there’s no room to walk because that deep, comfy chair you love comes halfway out into the room."

 

Hoffman frequently asks sellers to remove furniture from rooms that feel overstuffed. "If you’ve got a huge china cabinet in a small dining room, it’s distracting," he says. "At least take the hutch off."

 

The color palette is very important in a smaller house, says Matthew McNicholas, an architect with MGLM Architects in Chicago. "Loud colors make a space feel smaller because they jump across the room at you," he says. "You want the walls and your furniture to recede." That doesn’t mean everything has to match. 

 

"Eliminate the high contrasts," he says. Lathrop says the same colors should move throughout the house. "Blend colors in more medium tones," she says.

 

McNicholas suggests installing a single type of flooring throughout the house. "Using the same color carpet or the same hardwood pulls your eye along from room to room, and maximizes your perception of space," he says.

 

Strategic lighting is another way to create the illusion of more space, the experts say. "Use corner uplighting and a room will feel much more open," Hoffman says. In fact, he adds, make sure the house is flooded with as much light as possible. That means trimming bushes or trees that block windows and tying back or removing heavy draperies that close in a room.

 

Another way to maximize space is to install as much covert storage as possible, such as pressing the furniture into double duty. Hoffman encourages clients with children to buy large wicker baskets that function as coffee tables and toy storage. 

 

When selling a smaller house, he tells clients to keep a couple of large laundry baskets handy. Then, if they have to leave in a hurry for a showing, they can pack the baskets and take the clutter with them to the car.

 

 

Room Mapping

Before purchasing any furniture or accessory, it’s critical to map out a room. "That way you won’t discover you can’t open the door to the storage compartment in your new end tables," Lathrop says. She recommends putting a small console in the entry or living room and buying bookcases with a cabinet section.

 

And then there’s the closets: Clean them out. Kay Courtney, CRS®, GRI, a broker in Grand Rapids, Mich., encourages her clients to remove half the items from their closets to get ready for showings. 

 

"If the closet is overstuffed, it says to a potential buyer, ‘There’s not enough storage space in this house.’ "And just to live comfortably, she recommends storing off-season clothing somewhere other than the closet, such as under the bed. And don’t forget the basement. 

 

Courtney says adding a few inexpensive cabinets, even to unfinished basements, can create lots more storage for off-season clothes and infrequently used items from the kitchen.

 

Hoffman reminds his sellers not to forget the outside of a house. High bushes, overgrown trees, lots of outdoor furniture, and other yard paraphernalia can make a house look smaller. "People want the ideal," he says. "If you don’t have it, create it." Installing flower boxes or hanging a swing on the front porch adds a touch of charm and coziness to a smaller house.

 

For the more adventurous, McNicholas offers a few easy structural changes that give the illusion of more space. Higher ceilings make a room feel larger. In an existing house, building out a small soffit along the edge of the ceiling, creating a tray effect, tricks the eye into thinking the center of the room is higher than the edges. 

 

"It feels bigger," McNicholas says. And lowering the ceiling in a hallway makes the rooms off it feel bigger and grander. "Even a few inches makes a big difference when you walk into the room and get the sense of that extra height," he says.

 

Buyers also may need some extra coaching when looking at smaller houses. "You have to show them how they can repurpose rooms, like splitting that fourth bedroom they don’t need to accommodate a master bathroom and closet," Hoffman says. It’s not uncommon for him to bring along an architect or remodeling expert to help potential buyers see the possibilities. 

 

"People want the perfect house immediately," he says. "When they’re buying a smaller house, you have to prep them. Let them know they may have to make a few changes, but that it’s not scary or overly difficult."

 

He also likes to highlight the benefits of smaller houses. "They tend to be closer to the city, which means easy access to public transportation," Hoffman says. "And they’re often single floor, too, which can be useful in so many ways, from cleaning to just getting around."

 

Another benefit of a modestly sized house is that it forces families to spend time together, says McNicholas. "When everyone has a room to be entertained in, you’re not interacting much," he says. "When you have a smaller space, it puts you together. You can rediscover your family."

 

But buyers do have to think differently. "It takes more thought and planning to live in a smaller space," Lathrop says. "You have to think about what you need, how you can be more efficient, and where can you add storage." The key is not to be afraid and to embrace the benefits, she says. "It’s much easier to take care of, and your electric bill will be lower. What’s not to love?"

 

 

Storage Smarts

If space is at a premium, home owners need storage that’s both functional and beautiful. These days, it’s not hard to find. "They’re coming out with wonderful furniture with storage built right in," says interior designer Roberta Lathrop. "There are storage ottomans, end tables—even chairs with places to store your remote."

 

When looking for pieces that can double as hidden storage space, pick designs that don’t skimp on the details. 

 

"Traditional details like crown molding or base moldings make a room feel grander," says Matthew McNicholas, an architect with MGLM Architects in Chicago. The same can be applied to furniture. "A room is nicer when the details in it are nice," he says. "The trend in bigger houses is to use less expensive materials because you need so much of it." In a smaller space, it’s easier to upgrade the materials for a more elegant feel.

 

Don’t forget "found" storage, or space that isn’t obvious. Home owners can install bed risers, which safely lift a bed five or six inches to create storage space underneath. 

 

Another example: spice risers for kitchen cupboards. The bleacher-like devices create three times the space of a single cabinet. Many companies now offer heavy-duty shelving that attaches to the ceiling in garages, basements, and laundry rooms.

 

 

Stashed Away

Small closets call for big ideas when it comes to maximizing space. Some are simple and relatively inexpensive, such as adding a second hanging rod or storing off-season clothes under the bed. Experts suggest adding a shelf or two above the rods, hooks on the back of doors and bedside tables with lots of drawers. Decorative hooks on the walls can be used for purses or belts and ties.

 

Of course, the simplest way to create more closet space is to reduce what’s going into it. "When it comes to closets, we just don’t realize how much we really have," says interior designer Roberta Latham. She suggests trying on each piece of clothing to see what fits and what still works. 

 

If it doesn’t fit, donate it. If something needs mending or is stained—and has been that way more than six months—get rid of it.

 

"Do an inventory and determine how much space you need for tops, bottoms, shoes, and purses," she says. "Then identify your living habits. Do you like to reach in and grab, or do you prefer everything neatly folded away?" That can help determine what type of storage you need.

 

Target the closet doors. Replacing a sliding closet door with a regular double door can add six inches of hanging space. Changing to bi-fold or pocket doors can add even more space, Lathrop says.

 

Architect Matthew McNicholas says to look for empty or dead space to add built-in bookshelves or cabinets.

 

Other than the bedroom, the kitchen is probably the room most in need of storage space. "There are so many new, more efficient ways of storing things," Lathrop says. "There are rollouts [in the cabinets], spice racks, all sorts of things." 

 

In terms of design, Lathrop says the trend is toward "a European look" that has more efficient storage than the traditional American cabinets. "The kitchen is one of the main meeting areas in a house," she says. "You should think about how you’re going to use the space and what you need to store."

 

 

Keeping Order

Coat Rack A line of decorative hooks hung on the wall can neatly store coats, purses, and scarves. Many sets come with a shelf on top, creating even more space.

 

Trundle Drawers For storing off-season clothes, large or odd-sized toys, or anything else that will fit under the bed or under a table. Be sure to look for rolling casters.

 

Trunks Trunks made of metal, wicker, or canvas can function as coffee tables or end tables with loads of storage inside.

 

Corner Cabinets These shelves slide into corners to turn dead space into storage. They come in a variety of heights, widths, and finishes, and many have doors to hide what’s inside. Try open, hanging corner shelves for a more modern look.

 

Plenty of home buyers have found themselves at the closing table, ready to sign the myriad documents that will officially make them new homeowners--only to get nasty sticker shock. What was originally supposed to cost them, say, $2,500 in closing costs, has turned into $3,000.

The Good Faith Estimate (GFE), a tally of the fees associated with a mortgage loan due at closing, is exactly that – an estimate. Often these costs, which are provided by mortgage brokers and lenders to borrowers within three days of getting a loan application, escalate by closing time.

But on Jan. 1, new federal rules adopted by the Department of Housing and Urban Development took effect, mandating the use of a redesigned, simplified Good Faith Estimate form. The idea behind the revision: to avoid those closing-table surprises.

The main change is how lenders communicate fee information to borrowers. Under the old system, there was no standardized format. "Fees were communicated in multiple ways, which adds to the confusion when comparing costs," says Keith Gumbinger, a vice president at HSH Associates, which tracks the mortgage market. Under the new rules, lenders will all be required to use the same form for their Good Faith Estimates – a three-page document issued by HUD.

There are also new rules capping increases in costs that are disclosed on the Good Faith Estimate and guidelines so that fees listed on the initial GFE reflect the actual cost at settlement. "Those fees on the GFE at the beginning of the process will be the same on HUD-1 form [final settlement statement] at the end of the process," says Mr. Gumbinger.

The new GFE guidelines are certainly better than the old ones and will reduce closing costs modestly – but there are still some kinks in the process, namely opportunistic pricing, says Jack Guttentag, professor of finance emeritus at the Wharton School who also operates a web site that offers free mortgage information.

That means that two different borrowers can go to the same lender but get two different estimates. The lender can size up the first one as a sophisticate, the other as a dupe, and charge the latter more than the former – just because he thinks he can get away with it. "There's no ready way a disclosure statement can prevent that," Mr. Guttentag says.

Prospective buyers should also be aware that while overall costs associated with closing on a home may come down as a result of the new GFE, they might have to pay up down the line in other ways. It will cost lenders to comply with the new regulations: they have to buy new software, print new documents, train loan originators to fill out the new forms properly. "They will be built into fees, so eventually consumers will pay" for these overhead costs, says Mr. Gumbinger.

So will the new good faith estimate make borrowers savvier about shopping around for a loan? Some are doubtful. "The forms are still pretty complicated," says Richard Vetstein, a real estate attorney with Vetstein Law Group in Framingham, Mass. "Even for me – a real estate attorney – it took several hours to go through the forms and all the changes, and figure out what's going on."

Here, a summary of the types of charges you can expect to see on your Good Faith Estimate.

1. Fees that cannot change from the original GFE to final settlement. These include the lender's origination and underwriting charges, and the credit or "points" based on the specific interest rate chosen.

2. Fees that can increase up to 10% at settlement. These include services required and recommended by the lender. If the borrower selects a third-party provider (for title services, title insurance and recording charges) from the lender's approved list, the fees cannot increase by more than 10% from the upfront estimate to the final.

3. Fees that can change without limit. These include charges from service providers (for title insurance) chosen by the borrower, but not recommended by the lender. This category also includes things like daily interest charges, homeowner's insurance, as well as flood and pest insurance, if necessary. It encourages borrowers to do their own shopping. "It prevents the worst abuses of price escalation on third-party charges for service providers selected by the lender.

Lease option sales were popular financing instruments in the late 1970s and early 1980s. They were primarily used as a way to circumvent alienation clauses in mortgages. Proponents claimed the sale was not really a sale because it was a lease; however, courts argued otherwise.

Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a real estate lawyer. The information below is an overview and is not meant to be construed as legal advice.

Basics of an Option

• Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial or as little as $1.

   

• Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the option.

   

• The term of the option agreement is negotiable, but the common length is generally from one year to three years.

   

• Option money is rarely refundable.

   

• Nobody else can buy the property during the option period.

   

• The buyer can sell the option to somebody else.

   

• If the buyer does not exercise the option and purchase the property at the end of the option, the option expires.

   

• The buyer is not obligated to buy the property.

Basics of a Lease Option

• Buyer pays the seller option money for the right to later purchase the property. The lease option money may be substantial.

   

• Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.

   

• During the term of the lease option, the buyer agrees to lease the property from the seller for a predetermined rental amount.

   

• The term of the lease option agreement is negotiable, but the common length is generally from one year to three years.

   

• The option money generally does not apply toward the down payment.

   

• A portion of the monthly rental payment typically applies toward the purchase price.

   

• Option money is rarely refundable.

   

• Nobody else can buy the property during the lease option period.

   

• The buyer generally cannot assign the lease option without seller approval.

   

• If the buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.

   

• The buyer is not obligated to buy the property.

Basics of a Lease Purchase

• Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial.

   

• Buyer and seller agree on a purchase price, often at or a bit higher than market value.

   

• During the term of the option, the buyer agrees to lease the property from the seller for a predetermined rental amount.

   

• The term of the lease purchase agreement is negotiable, but the common length is generally from one year to three years, at which time the buyer applies for bank financing and pays the seller in full.

   

• The option money generally does not apply toward the down payment.

   

• A portion of the monthly lease payment typically applies toward the purchase price.

   

• Option money is nonrefundable.

   

• Nobody else can buy the property unless the buyer defaults.

   

• The buyer typically cannot assign the lease purchase agreement without seller approval.

   

• Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.

   

• The buyer is obligated to buy the property.

Doing a Lease Option / Lease Purchase

Hire a real estate lawyer to draw the documents and explain your rights, including those of possession and default consequences. The property might be encumbered by underlying loans that contain alienation clauses, giving the lender the right to accelerate the loans upon sale.

Sometimes sellers give the option money to their real estate agent as full payment of commission. Agents are not always involved in the exercise of lease options or fulfillment of lease purchase agreements and, even if you have retained real estate agent representation, you still need a real estate lawyer. Agents are not lawyers and cannot give legal advice.

In the event of a lease purchase, obtain all the disclosures and do your due diligence just like you would on a regular sale. This means:

• Get a home inspection.
• Examine the title policy.
• Obtain an appraisal.
• Read seller disclosures.
• Consider obtaining pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors.

Lease Purchase Benefits for Sellers and Buyers

Lease purchase agreements are commonly offered by sellers of hard-to-sell properties. Think about it, if the property was easy to sell, the seller would sell it to a conventional buyer who would pay the seller cash.

• Sellers generally get market value at today's prices and relief from paying a mortgage on a vacant property.

   

• Although the lease payments may exceed market rent, the buyer is building a down payment and banking that the property will appreciate beyond the agreed upon purchase price.

   

• Buyers generally make a small down payment, with little or no qualifying, making a lease purchase an attractive way to ease into the benefits of home ownership.

   

• Buyers also receive a forced savings plan since part of the lease payment is credited toward the purchase price at the end of the lease option agreement.

   

• If the buyer defaults, sellers do not refund any portion of the lease payments nor the option money and may retain the right to sue for specific performance.

For more information, contact a real estate lawyer.

In most states, home sellers must disclose any defect they know about that could affect how desirable -- and marketable -- their home is before they sign a purchase contract. Even in the six states that lack a "mandatory seller's property condition disclosure" (Alabama, Arkansas, Kansas, Vermont, West Virginia and Wyoming), the state's licensing agency may require real estate agents to tell buyers what they know. In all states, real estate agents who belong to the National Association of Realtors are obligated by their code of ethics to disclose any defects they know about.

But you may have fallen in love with a house, and spent hours preparing a purchase contract, before the disclosures are made. You should always make your purchase contract contingent on a professional home inspection ($300 to $350). Home inspectors could miss hidden problems, however, such as a basement that floods during a downpour.

This list of red flags, recommended by Kathleen Kuhn, president of HouseMaster, a nationally franchised home-inspection company, and Bill Richardson, president of the American Society of Home Inspectors, can help you identify potentially pricey problems. You can use your observations to winnow your choices or to factor in condition when you negotiate price with the seller.

Poor water pressure. Aside from issues of comfort and convenience, low water flow may indicate plumbing problems, such as corroded pipes that will need to be replaced down the road. Tearing out old plumbing and replacing it with copper pipes can run $2,000 to $15,000 or more in a typical 1,500-square-foot home. A less costly alternative is cross-linked polyethylene (PEX) piping, which unlike rigid copper piping, is flexible and easier to install (approved for potable use in all U.S. model plumbing and mechanical codes, but may not be approved in local building codes).

Among tests you can do: Run water in a bathroom sink and check for weak flow. Flush the toilet while the water is running. Does the faucet flow drop off during the flush? In the bathroom located farthest from the water heater, turn on the hot water. Is there an unduly long delay before the water turns hot?

Ceiling stains. Something's leaking. If the stain appears beneath a bathroom, odds are the shower is leaking. It may merely need recaulking or regrouting, but it could also require ripping out tile and replacing the shower pan, a much more costly process (about $1,500). Most roof leaks result from neglected flashing that seals "valleys" in the roof or around a chimney or vents (cost to repair: $200 to $500). But roof leaks may also mean it's time to replace shingles -- at $100 to $350 per 100 square feet for asphalt shingles and $210 to $1,000 for wood shingles.

Troublesome doors. Are the doors hard to close? Do they swing open by themselves or fail to open fully? If you have one bad door, it may simply have been installed incorrectly. But more than one may indicate a serious structural issue, such as a foundation that has settled or framing that is deteriorating. Fixing this problem can require structural and geotechnical engineering reports and thousands of dollars in repairs.

Overloaded electrical outlets or lots of extension cords. Today's electrical demands may exceed the capacity of homes built as little as a decade ago, says Kuhn. You'll spend $75 to $250 to have an electrician add a 120-volt outlet to an existing circuit. Or, if the electrical system is very outdated, it may require a new electric panel. A new, 100-amp panel will cost $1,500 to $2,500.

Exterior features that slope toward the home. A porch, patio, driveway or grading that slopes toward the home all but guarantees water in the basement. And that may lead to structural decay, mold and insect infestation. In the basement, a musty smell may indicate previous flooding or ongoing moisture problems. Check the walls for stains, dark or light, which are tell-tale signs that water has penetrated the walls.

Solving the problem may be as simple and cheap as adding gutter extensions or regrading soil away from the home, or it could require thousands of dollars to excavate and build drains. Some homes may require exterior drains (one at the bottom of a sloped driveway, for example) as well as buried drains.

Odors. Cigarette smoke and pet odors can be hard to get rid of. And if a home smells too clean -- heavy with the scent of cleaning products (especially bleach) or plug-in deodorizers -- the seller may be trying to cover up an odor, such as mold or urine. If so, you need to inquire further, says Richardson, of the American Society of Home Inspectors.

Synthetic stucco siding. This must be installed precisely or else moisture will be trapped behind it, resulting in mold and decay. In the worst case, the siding will have to be replaced. For a medium-sized house (1,250 square feet of exterior surface area), replacing vinyl siding can cost $2,500 to $8,750, while wood or fiber cement siding can cost $5,600 to $10,000 or more. Especially in humid climates, you may want to pay for a special inspection. HouseMaster charges $600 and up, depending on how much of the material has been used and the size of the house.

If you find out before you close your purchase that the seller deliberately misrepresented or failed to fully disclose the home's condition, you may have the right to rescind the contract under state law. If it's a done deal, you'll probably have to sue the seller to recoup your damages. In some states you can also seek repayment of your legal costs. Consult with a lawyer who specializes in real estate fraud. If you have reason to believe that the seller's agent was negligent, you can take it up with the local Board of Realtors (www.nar.com, click on "local and state associations") and the state's licensing agency (to find yours, visit the Web site of the Association of Real Estate License Law Officials).

The current up-front premium is set at 1.75 percent of the value of the loan. FHA may decide that an increase in that premium is needed also, officials said.