Visit any active adult retirement community for senior living, and you're more likely to see residents zooming by on motorized golf carts than chugging along in a push wheelchair. In fact, if you don't swiftly move out of their path, these happy-go-lucky golfers just might run over you. This is not your grandfather's retirement community.

Today's retirement communities are as popular as Beatlemania in 1964, and seniors living in these communities know all the words to Love Me Do.

What is an Active Adult Retirement Community?

Retirement communities are age-restricted and often located near metropolitan areas or nearby suburbs. The minimum age is typically 55, with one member of the household qualifying. Some communities restrict ownership to those age 62 and older, and all occupants must be at least 62. Driving by, though, you might think it's just another subdivision.

Many are gated and private. Homes are closer together and lot sizes smaller. Most of the homes are based on particular models, so they tend to resemble each other. Almost all offer a laundry list of activities and amenities.

Senior Living in Style: Amenities

Home owners in active adult retirement communities pay into a homeowner's association, which cares for the grounds and handles maintenance. Part of the homeowner association fees pays for such amenities as:

• Club House
• 18-Hole Golf Courses
• Libraries
• Fitness Centers
• Swimming Pools and Spas
• Arts & Crafts Centers
• Billiards and Card Rooms
• Tennis Courts
• Basketball Courts
• Continuing Education Classrooms
• Hiking & Biking Trails
• High-Tech Media Centers
• Banquet and Ballrooms

The list is endless. Retirement is a time to play and, for many, a time to enjoy meaningful work. Seniors over 55 know how to have fun and enjoy the social aspect of being surrounded by friends who like to do the same things that they do.

Benefits to Seniors Living

Why move out of a perfectly comfortable home that has served you well for a decade or more and into a retirement community filled with strangers? There are plenty of benefits that lure seniors into these 55-plus subdivisions.

• Single-story living.
  One level means those facing troubled knees or aching bones aren't forced to climb stairs.

   

• Birds of a feather.
  Your neighbors are unlikely to be screaming teenagers on skateboards; they are people just like you.

   

• Little or no yard maintenance.
  The homeowner association mows lawns, waters gardens, trims trees, sweeps walks and, in areas where it's needed, provides snow and ice removal.

   

• Resort living.
  Fun-filled activities are located within walking distance or an easy commute. All fees are included.

   

• Mix work with play.
  Many of today's seniors are not ready to live a life of 100% leisure and want to continue working or perhaps start a new career. Homes in retirement communities generally include an office, den or separate workspace.

Buying a Home in an Active Adult Community

Buying a home in a newly built senior living complex or subdivision is no different than buying from a builder. You might want to hire your own real estate agent to represent you, an experienced agent who understands 55-plus communities. Here are more tips:

• Arrange your own financing. You might get a better deal over the builder's lender.
• Get a home inspection, even if the home is brand new.
• Talk to the neighbors before you buy.
• Come back on the weekends. Visiting grandchildren can be noisy.
• Question the homeowner association documents and read meeting minutes.
• Ask about utilities and other associated costs of ownership.
• If you have questions about seller disclosures, hire a lawyer.
• Consult with a tax accountant to determine if the purchase fits your retirement plans.
• Ask for a home warranty plan.

Although the majority of home buyers over 62 pay cash for a new home, you might want to later consider a reverse mortgage.

Good news for prospective home buyers: You can find 30-year mortgages for less than 5% again. But those rates may not last . And these days it's almost impossible to lock in a rate while you hunt for a home. Banks—for understandable reasons—now want to evaluate a property before pre-approving borrowers.

Mortgage rates have been falling in concert with sinking interest rates on long-term Treasury bonds. The two are closely related, through a complex mechanism involving mortgage-based securities. And if mortgage rates start rocketing again in the next few months, a rebound in long-term Treasury yields will likely be the cause.

People who worry that rates will spike again before they find a home can protect themselves by investing in a mutual fund that tracks long-term interest rates. Or they can buy call options on one of those funds instead. If Treasury rates suddenly skyrocket, you may make back what you would lose on the mortgage rates.

This may sound like some incredibly complex footwork, and most people will shy away from trying these moves. But considering the cost of even a slight rate change over the life of a mortgage, they're worth considering.

After all, if you're looking to buy a typical $200,000 home, a rise in mortgage rates from 5% to 6% will cost you an extra $1,300 a year for the next 30 years.

These funds come with risks. The two exchange-traded funds, TBF and TBT, are specifically designed to track daily moves in the long-term bond market rather than long-term moves. The TBT is particularly volatile because it is what is known as an "Ultra" fund—it will give you double the market move, up or down. The drawback: If rates fall further while you are house hunting, you will save extra money on your mortgage —but you'd lose money on these funds.

That's why the options market looks especially interesting.

You can purchase call options on the TBT fund. These calls wager that the $4 billion fund will see a sharp rise in share price in the next few months, and could operate like a form of insurance if mortgage rates suddenly spike during your real-estate search.

Here's how it works: Today, with 30-year Treasury rates at just 4%, the TBT is about $44 a share. But for $1.20 a share you could buy a $50 call option on the fund, good for any time between now and January. That would simply give you the right to buy the TBT at $50 between then and now. So if long-term interest rates were to skyrocket over the next few months, and the TBT soared to, say, $60, you'd pocket a profit of $10 a share (less the $1.20 in costs for the option).

Because the TBT tracks daily performance, there is no absolute way of knowing what long-term Treasury rate would correspond to any given price on the TBT. But the fund was about $59 in June.

Issues like compliance and complexity probably deter most financial intermediaries from offering any such product. That's a shame, because an options hedge could be very useful to a lot of middle-class Americans.

No strategy can offer perfect protection against mortgage rates: it's a work-around, based upon derivatives of derivatives of the Treasury market. But anyone who thinks or fears that long-term interest rates will rise dramatically in the next few months might look at buying call options on the TBT.

Home buyers are finding that the battered real-estate market offers just as many opportunities for headaches as for bargains.

Seth and Crystal Grotzke, both 25 years old, recently bought a bank-owned two-bedroom, two-bathroom townhouse in Edina, Minn., for $110,000—when similar homes in the same development were selling for as much as $131,000. But exactly one day before the scheduled July closing, the Grotzkes learned there was a second, unpaid mortgage. Because of the foul-up, the couple was forced to live in Mr. Grotzke's boss's basement for more than a month. They finally closed on Aug. 31.

"We knew there would be title issues, but none that would last for that long," says Mr. Grotzke, an assistant pastor. He adds that buying a foreclosed property is a way for God to "teach you patience."

Lots of home buyers are learning about patience these days. In August, nearly a third of overall housing sales were distress sales, according to the National Association of Realtors, up from 18% in March 2008, when it began tracking such sales. The figure includes both foreclosures and so-called short sales, in which the lender agrees to accept less than the full balance of a mortgage in order to unload the property.

In some parts of the country, such as Bakersfield, Calif., Las Vegas and Lakeland, Fla., distressed properties constitute half or more of all sales. So far this year, there have been nearly 411,000 sales of U.S. properties in some stage of foreclosure, according to RealtyTrac, which publishes a national database of homes in default, auctions and bank-owned homes.

Those numbers aren't making it any easier to buy distressed property. Bidding wars are erupting for the lowest-priced foreclosures. Experienced investors with cash are elbowing aside first-time buyers who need mortgages. And banks generally sell property "as is," without the defect disclosures required of other owners. Short-sale buyers, for their part, often face delays of weeks or months as they wait to hear back from lenders—and from the institutional investors who bought securities based on the mortgages.

Vandalized Properties

Distressed-property buyers also often have to cope with the fallout from the ruined lives of previous owners, such as vandalized properties and liens from second mortgages, taxes, unpaid water bills, homeowner-association dues and court judgments. For all that, final sale prices often aren't significantly lower than average in some areas, because the foreclosure glut has also driven down prices for sellers who aren't in default.

Buyers have to be thoroughly prepared by securing financing in advance and making sure they have a strong stomach, experts say. They should seek out agents with extensive experience and training in distressed property because the transactions are often complicated and time-consuming. Pushing and prodding bank officials, loan servicers and others is a big part of the job.

Colin and Alisabeth Shearn of Cherry Hills Village, Colo., a Denver suburb, managed to snag a seven-bedroom Mediterranean-style house in a short sale for $1,272,000, more than $900,000 below its original listing price in 2007. By the time they bid on the house last February, it had gone unsold for nearly two years and the price had been reduced to $1.5 million from $2.2 million. The couple closed on the purchase at the end of May, and moved in with their two preschool-age children.

"It was nerve-racking," says Mr. Shearn, 41, a university research scientist. There was a long delay hearing back from the seller's bank, and the last-minute discovery of a lien from an unpaid water bill—the water was about to be shut off.

But in the end, Mr. Shearn, says he and his wife, 42, a co-owner of a software company, were happy. "We really lucked out to find this house."

Short sales like the Shearns' are particularly complicated. Lenders require detailed information about both buyers' and sellers' finances, and homeowners generally have to prove hardship. The entire package of documents is scrutinized not just by lenders but by the mortgage investors. Second- and third-lien holders frequently hold up transactions demanding a larger share of the settlement. The average transaction takes four to six months or more, agents say.

Lenders say they are stepping up their efforts to handle short sales. J.P. Morgan Chase & Co. has doubled the number of employees handling such sales, while Bank of America Corp. recently began allowing real-estate agents to submit short-sale documents online, reducing the chance a sale will be stalled. At Wells Fargo & Co., efforts to speed up short sales helped produce a 145% increase in these transactions in August compared with the same month a year earlier, the bank says. Meanwhile, the National Association of Realtors and other groups have recently launched short-sale and foreclosure certification programs for agents.

New Guidelines

The U.S. Treasury Department is expected to issue streamlined guidelines to lenders on short sales soon. Housing-industry leaders say complicated procedures are hindering them from clearing the large inventory of distressed property necessary to return the housing market to normal. Now, only about 20% or so of short sales are successful, according to real-estate brokerage Re/Max International Inc.

Buying a foreclosure is usually speedier than a short sale because lenders already possess the property. But there are other drawbacks. State laws vary considerably with respect to legal procedures surrounding foreclosures. Many states require judicial proceedings for foreclosing on a home that can take more than 12 months, a period during which the home may be vacant or occupied by tenants or squatters. Homes may have appliances, pipes and even electrical wiring ripped out.

Despite the hurdles, competition for low-priced foreclosures under $300,000 is keen, sources say. "The bargain hunters have come out from everywhere, and they are getting into bidding wars," says Re/Max Chairman Dave Liniger.

Buyers must be prepared and ready to move on a dime. If they're paying cash, they have to certify they have the funds available. Those who need financing should obtain pre-approval from a lender before even looking at properties.

Successful foreclosure buyers often bid significantly above the asking price. Chuck Brueske, 46, a hospital biomedical technician, says he paid $111,000 in August to win a bank-owned townhouse built in 1981 in Maple Grove, Minn., listed at $99,600.

Mr. Brueske says his own good credit history helped him win over two other bidders.

"It was unusual that in a down, depressed market that I had to bid more than the asking price, but as it turned out the other bids were higher than mine," he says. "It took me a while to swallow that."

Some home buyers give up after discovering there are bargain properties without all the obstacles. Jerrold Horning, 34, an electronics technician for the U.S. government in El Cajon, Calif., says he and his wife bought a house in the conventional market after seeing the condition many houses were in.

"Some of the foreclosures I looked at were horribly trashed. You would have to put another $100,000 in just to make it livable," he says. Of buying a distressed property for a primary home, he says, "I don't think it's worth the hassles."

Buying a foreclosure home often is appealing to house hunters trying to stretch their dollars. But finding a good one can be a challenge.

"The vast majority of the banks don't want us to advertise [foreclosure homes] as 'bank-owned' because it comes with a negative connotation," says Ryan Melvin, co-owner of More Realty Group in Las Vegas.

That means there's no sign on the front lawn indicating that it's a bank-owned house. And a buyer probably won't find a property advertised as a foreclosure in marketing materials, says Mr. Melvin, who specializes in real-estate owned properties, or REOs, those that have been reclaimed by a bank, typically after an unsuccessful foreclosure auction.

Where to Find Them

So, if you're considering the purchase of a home that's owned by a bank, you'll need to do some homework.

One option: Go straight to the bank. Banks' Web sites will list properties that the financial institution has reclaimed. To find a list, do a Web search for "REO" and the name of the lender. Contact information for the property's listing agents is usually provided for each entry.

For a fee, other sites will hunt down properties for you. RealtyTrac.com, which helps people find foreclosure and pre-foreclosure properties, charges $49.95 a month, after a free seven-day trial. The company also recently launched BankHomesDirect.com, which charges $19.95 per month and lets people search just for REOs.

Foreclosures.com charges $49.95 per month, after a free seven-day trial.

You also can enlist the help of an experienced real-estate agent. Someone who works regularly with REOs might be able to track down the properties more easily than a traditional agent. The National REO Brokers Association has a searchable database of brokers on its site, nrba.com. The REO Network, reonetwork.com, offers a free listing of real-estate agents specializing in REOs.

Get a Thorough Inspection

When shopping around for a foreclosure property, it's important to know just how much work you're in for -- and how much it's going to cost you. Foreclosure homes are in various states of disrepair; some fixes are cosmetic, while others can be extensive.

Sometimes, people set their sights on bank-owned properties "like the word 'foreclosure' equals 'good deal,' " says Mark Goldman, a mortgage broker with Cobalt Financial and a real-estate lecturer at San Diego State University. But that's not always true.

Lenders aren't held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn't occupied the home to notice leaks or other problems. So an inspection is crucial.

"If there are lessons out of the last couple of years, it's certainly buyer beware," says Dan Steward, president of home-inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.

"We have all heard the stories of people ripping the copper pipe and wiring out. People have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall," Mr. Steward says. Some have ripped out toilets and kicked in walls or left faucets running before vacating the house, often out of anger.

While you don't need an inspector to tell you that the toilet is missing, he or she can tell you if there is damage 20 feet down the water line because of the way the toilet was ripped out, Mr. Steward says.

Other issues could pop up due to the property being vacant. Large banks will often hire a service to cut the grass, shovel the snow and winterize a home. But when homes aren't occupied, it's harder to catch small problems before they become big ones.

Come Prepared

To increase your chances of getting your offer accepted and having a quick closing process, have all paperwork and requirements in order before making an offer, says Duane Andrews, chief executive of Clear Capital, which provides valuation products for the mortgage and lending industries.

That includes having any financing approved and writing a clean offer -- not asking for minor repairs, for example.

Most bank-owned properties are sold "as is," Mr. Melvin says, so if there is something you want fixed, it's best to just factor that into the price you're offering.

But don't expect to bargain the listing price way down. Banks typically price their properties at a 20% to 30% discount to begin with, he says. If the property has been on the market for a week or two, don't expect the bank to drop the price; if the listing is older, you might have some wiggle room.

Make sure to follow directions when submitting the offer. "Most listing agents will have instructions on how we want buyers' agents to submit the offer," Mr. Melvin says. Delays can occur when instructions aren't followed.

And don't be surprised if the bank asks you to get approval from its mortgage operation. You often don't have to take the loan from their company, he says, but they may want to get a closer look at your finances to make sure you're a solid buyer.

The Federal Housing Administration, which insures lenders against losses on home mortgages, announced Friday that it would tighten credit requirements but said it has enough reserves to handle expected claims.

The agency confirmed that, as of Sept. 30, it would fall short of a legal requirement that it maintain supplementary reserves of 2% of the loans it insures. Those reserves supplement a fund that provides for projected claims over the next 30 years. The extra capital cushion last year was about 3%, down from 6.4% in 2007. The Washington Post reported Friday that the FHA expected to fall short of the 2% minimum, something outside experts have long said was likely.

Mr. Stevens said tighter credit standards would suffice to rebuild the cushion to 2% or more, and that the FHA wouldn't need to raise the premiums borrowers pay or seek an increase in its minimum down-payment requirement of 3.5%.

The FHA has taken a much bigger role in the mortgage market during the past two years, as investors have shied away from home loans that lack government backing. In this year's first half, about 19% of new home mortgages were insured by the FHA, up from about 2% in 2006, according to the trade publication Inside Mortgage Finance.

Under planned rules, the agency said lenders making FHA-insured loans would need to show net worth of at least $1 million, up from $250,000, and further increases might be sought later. The agency is seeking to ensure that lenders have funds available to compensate the FHA if their loans fail to meet quality standards.

Appraisals will be valid for no more than four months, down from six to 12 months previously. The FHA also plans to change rules aimed at averting pressure on appraisers, making them more consistent with those adopted earlier this year by Fannie and Freddie. Mortgage brokers or bank employees paid on commission won't be allowed to order appraisals.

In addition, the FHA plans to hire a chief risk officer for the first time.

"These are things they should have been doing for a long time," said Tom Lawler, an independent housing economist in Leesburg, Va.

The FHA said it had more than $30 billion of total reserves, including the primary fund and the extra cushion. That equates to 4.4% of the value of loans it insures.

The FHA earlier reported that in July 7.8% of the single-family mortgages it insured were 90 days or more overdue or in the foreclosure process, up from 6.6% a year earlier. For the second quarter, about 8% of all home mortgages were 90 days or more past due or in foreclosure, according to a survey by the Mortgage Bankers Association.

The first major change to the $8,000 home buyers tax credit began moving through Congress last week, giving hope to real estate and building groups pushing for extension of the entire program before it expires Nov. 30.

House Ways and Means Committee chairman, Congressman Charles Rangel, a New York Democrat, combined several smaller bills into the “Service Members Home Ownership Act of 2009” late last week, with a floor vote expected this week.

The bill is intended to correct a flaw in the original tax credit legislation: By requiring buyers to occupy and own their first home for 36 months to fully qualify for the credit, the program creates serious problems when military, Foreign Service and intelligence agency personnel are transferred overseas.

During their absence, they are not occupants of their houses, and sometimes have to rent them out or sell. Any of these events make them ineligible to retain the $8,000 credit under current law. Ineligible buyers must then repay the credit to the IRS.

Oregon Congressman Earl Blumenauer, sponsor of one of the bills consolidated into Rangel's, said “it is absurd that thousands of Americans serving our country, away from friends and family ... must choose between their service work and home ownership.”

The Ways and Means committee's bill would waive the repayment requirement when a service member must sell a home within the 36 month period because of a transfer to a new duty station or overseas, and would count service-related absences toward the 36 month requirement.

Another provision in the bill would extend the $8,000 credit for another year for personnel who may have missed out on claiming the credit because they thought they wouldn't qualify due to an overseas posting.

The credit for these individuals would be extended to November 30, 2010 from November 30, 2009, provided the served outside the U.S. for at least 90 days during calendar year 2009.

The bill, which has bipartisan support, could be sent to the Senate for action as early as next week, Congressional sources told Realty Times.

More important for the housing market overall, however, is the precedent set by the bill's extension of the credit for an extra year. It's not a far leap from that position to a general extension of the entire $8,000 credit program to the same date.

The National Association of Realtors, National Association of Home Builders and the Mortgage Bankers Association jointly sponsored an ad campaign last week aimed at convincing Congress to give the credit program another year.

Financing the purchase of a home could be the most complex financial decision you'll every endure.

You need all the help you can get.

To help get you started with the basics, the Federal Reserve offers "5 Tips for Shopping for a Mortgage," because, well, the fundamentals always apply.

Don't bite off more than you can chew. Check your budget. You must have a budget so you can estimate what you can afford to pay for a home, including the mortgage, property taxes, insurance, and monthly maintenance and utilities.

You also have to have enough to save for emergencies. Plan ahead to have enough to afford your monthly mortgage payments for several years. Check your credit report to make sure that the information in it is accurate. A higher credit score may help you get a lower interest rate on your mortgage.

Shop around. Online and off, shop lenders, brokers, credit unions, government (city, county state) programs, even seller financing. Shopping around is a bear, but it can save you thousands of dollars.

Understand costs. Shopping around means scrutinizing loan costs and fees not just the annual percentage rate (APR) On any given day, lenders and brokers may offer different interest rates and fees to different consumers for the same loan, even when those consumers have the same loan qualifications. Keep in mind that lenders and brokers also consider the profit they receive if you agree to the terms of a loan with higher fees, higher points, or a higher interest rate.

Learn risks, benefits of loan options. Mortgages have many features -- fixed interest rates, adjustable rates, payment adjustments, interest-only payments, prepayment penalties, balloon payments and more. Consider all the features, including the APR and the settlement costs.

Have your lender calculate how much your monthly payments could be a year from now, and 5 or 10 years from now. A mortgage shopping worksheet can help you identify the features of different loans. Mortgage calculators can help you compare payments and the equity you could build with different mortgage loans.

Get advice from those you trust. Ask family, friends, co-workers, professional associates and others you trust for referrals. Talk with a trusted housing counselor or a real estate attorney that you hire to review your documents before you sign them. You can find a list of counseling resources at NeighborWorks and on the U.S. Department of Housing and Urban Development's (HUD) website or by calling (800) 569-4287.

Whether you're a buyer who suffered a foreclosure not long ago or you're a long-time renter interested in becoming a homeowner, the lease-to-own option may be good for you. I've written about this before (see my Lease to Buy May Be Good Option column) but a reader recently emailed me wondering where to find these rent-to-own properties. That question caused me take a closer look at this niche market. Here's what I found.

Wendy Patton, author of Rent to Buy, due out this month, talked to me about how to find the rent-to-buy properties and why potential buyers should research not only the property but the seller as well.

Patton recommends looking through Craigslist or the newspaper to find the properties. "I just call up owners [of properties for rent] and talk to them about their home," says Patton. She says your real estate agent can help with this process. Patton finds that many landlords whose properties are for rent actually would consider selling.

"Depending on where you are [located] in the country, 30 percent to 50 percent would say yes they would," says Patton.

Patton says that homes that have been on the market more than 120 days are a good starting place. She says buyers and their agents should investigate to make sure that the property is not upside down or an REO (real estate owned by the bank). "[Banks] don't do that yet but some of them might be starting to," says Patton.

The other thing Patton says to check is to see if the home is vacant. Of course, if a home is vacant that can put pressure on homeowners to consider a rent-to-own option. "Most of the time if the [homeowner] has already moved and they're not upside down, they obviously didn't have to sell to move so they're a perfect candidate to be a seller on a lease option or rent to own.

"They need to make sure the seller is not upside down. How do they confirm that? By looking at the mortgage statement through getting a mortgage authorization statement. … They need to make sure that the seller is not in foreclosure or going to go into foreclosure during that option period," says Patton. She says this is critical so that the buyers' payments are protected during the time that they are renting with the option to buy. Patton says buyers need to make certain "that the payment that they're making every month is going to be protected to go against that mortgage as a payment. In other words, instead of just paying the seller directly, maybe they should be paying the lender directly or through a third party that's going to pay the lender so that during that option period it's not swept out from underneath them in foreclosure," says Patton.

"Unfortunately, that's happened many times. Patton says, "[The buyer] gives the seller $10,000 or whatever the option is and then is making monthly payments when all of a sudden the sheriff shows up at their door and says 'You've got 24 hours to get out. The house has been foreclosed on.'" So even though the buyers were making payments to the seller, the sellers were not passing on the payments to the lender.

Other areas of concern are how repairs are handled. "Technically the seller is usually responsible for repairs if it's a rental but in a lease-to-own, it can be more equitably split. Maybe the buyer pays the first $500 and the seller pays anything over $500. The repairs are negotiable items," says Patton.

Inspections are absolutely necessary, says Patton. As with all home purchases, an inspection by a professional can help to expose any future problems with a property. The home inspection also allows buyers to identify trouble spots that they may want to use to negotiate repair procedures and price.

One other important consideration for renters interested in becoming buyers, whether you're doing a lease-to-own or not, is to use the rental period time to build or clean up your credit. "There's different credit repair companies that are reputable that can help them repair their credit," says Patton. She adds that it's vital to find a company that guarantees certain criteria that will be a benefit for the money they are spending in the credit repair program. Patton says before you begin a program do your research. "They have to have provisions of what the company is going to do for them and how the company is going to help [their credit score]." For more information on improving your credit score read my column called, What to do When Credit Card Debt is Keeping You Locked Out of Homeownership.