Top 8 things you need to know when buying a home

Tips for buying a house

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

Top 10 Reasons to get a Home Inspection

After your offer to buy a home enters into contract, the process of near-endless check writing begins. There are many necessary costs, such as realtor and lawyer fees, and the total of these expenses may have you looking for ways to save money elsewhere. You may be tempted to skip the home inspection and its $200 to $500 invoice, but there are 10 good reasons why you should get one.

1. It Provides an "Out"
A quality home inspection can reveal critical information about the condition of a home and its systems. This makes the buyer aware of what costs, repairs and maintenance the home may require immediately, and over time. If a buyer isn't comfortable with the findings of the home inspection, it usually presents one last opportunity to back out of the offer to buy. (This step is important when purchasing a property because it may save you thousands. For more, see Do You Need A Home Inspection?)

2. Safety
A home inspection can detect safety issues like radon, carbon monoxide, and mold, which all homes should be tested for. Make sure that your home-buying contract states that should such hazards be detected, you have the option to cancel the offer to buy.

3. Reveal Illegal Additions or Installations
A home inspection can reveal whether rooms, altered garages or basements were completed without a proper permit, or did not follow code, according to Chantay Bridges of Clear Choice Realty & Associates. "If a house has illegal room additions that are un-permitted, it affects the insurance, taxes, usability and most of all the overall value. In essence, a buyer is purchasing something that legally does not exist," she explains. Even new homes with systems that were not installed to code will become the new homeowners' financial "problem" to fix (and finance). (The home for sale/purchase must pass inspection. For more, see Housing Deals That Fall Through.)

4. Protection
Home inspections are even more critical if you are buying an "as-is" foreclosed property or short sale. Dwellings that have been boarded often develop hazardous mold problems, which are costly to remedy and pose health concerns. Greg Haskett, VP of shared services at HomeTeam Inspection Service says it's common for home inspectors to find that copper plumbing lines and outdoor compressors have been removed from foreclosed properties by people trying to sell copper to recyclers for money. (For more, see Should You Buy A House At Auction?)

5. Negotiating Tool
Realtor Jennifer De Vivo of Orlando-based De Vivo Realty says the home inspection report presents an opportunity to ask for repairs and/or request a price reduction or credit from the seller. Work with your realtor to understand what requests can and should be made to negotiate a better deal.

6. Forecast Future Costs
A home inspector can approximate the installation age of major systems in the home like plumbing, heating and cooling, and critical equipment like water heaters. They can diagnose the current condition of the structure itself, and tell you how long finishes have been in the home. All components in the home have a "shelf-life." Understanding when they require replacement can help you make important budgeting decisions, and it wll determine what type of home insurance coverage or warranties you should consider. (For more, see New Home Repair Troubleshooting.)

7. Determine "Deal-Breakers"
De Vivo suggests that home inspections can help buyers identify how much additional money or effort they are willing and able to spend to take the home to a condition that is personally acceptable. If you are unwilling to repair issues like faulty gutters, cracked walls or ceilings, perhaps you are not ready to end your home buying search.

8. Learn to Protect Your Investment
The home inspector is a valuable educational resource. He or she can suggest specific tips on how to maintain the home, and ultimately save you thousands of dollars in the long term, according to De Vivo.

9. Reveal the Big Picture
Haskett advises that people use the home inspection to understand the nuances of what may be the biggest purchase they ever make. "People fall in love with a piece of property based on the color of the walls, the location of the home, or something else; they are completely blind to the issues that can make that dream home a nightmare," he says. (For more, see Purchasing A Short-Sale Property.)

10. Insurance
Some insurance companies will not insure a home if certain conditions are found, or without the presence of certifications like Wind Mitigation and four-point inspections, according to Haskett. "Qualified home inspectors can do these things at the same time as their other services and save the home buyer time and money in the long run."

Home Buying Tips

Are you a first-time home buyer eager to get into the market? Here are steps to take to help you decide whether you're ready to take the plunge.

1. Check the selling prices of comparable homes in your area. Web sites such as Zillow and Homegain can give you a general idea of what you should expect to pay. You can also do a quick search of actual MLS listings in your area on a number of Web sites, including the site of the National Association of Realtors.

2. See what you can afford. Use Bankrate’s  mortgage calculator to see what your payment would be. To get a sense of the maximum you should spend, use MSN Real Estate’s home affordability calculator (below).

3. Find out what your total monthly housing cost would be, including taxes and homeowners insurance. To get a feel for the maximum amount you should spend, including taxes and insurance, use MSN Real Estate's home affordability calculator. In some areas, what you'll pay for your taxes and insurance escrow can almost double your mortgage payment. According to the Insurance Information Institute, the average yearly premium can range from $477 in Utah to $1,372 for unlucky Texans.

To get an idea of what you'll pay in insurance, pick a property in the area where you want to live and make a call to a local insurance agent for an estimate. You won't be obligated to get the insurance, but you'll have a good idea of what you'll pay if you buy. For an idea of what you'll pay in taxes, Zillow publishes property-tax information for homes all over the country. Just remember that exemptions and the intricacies of local tax law (such as Florida's Save Our Homes value cap) can create differences between what a homeowner is currently paying and what you can expect to pay as a new homeowner.

What's your home worth?

4. Find out how much you'll likely pay in closing costs. The upfront cost of settling on your home shouldn't be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowners insurance or homeowners association fees. You can see what closing costs average in your state by looking at Bankrate.com's annual closing cost survey.

5. Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs. Go much past 30% and you risk becoming house poor.

6. Talk to reputable real-estate agents in your area about the real-estate climate. Do they believe prices will continue falling or do they think your area has hit bottom or will rise soon?

Home affordability calculator
Combined annual income $
Other monthly obligations $
Cash for down payment $

7. Remember to look at the big picture. While buying a house is a great way to build wealth, maintaining your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there's no landlord to turn to, and these costs can drain your bank account.

So consider whether you're ready for the expense and effort of homeownership before pulling the trigger.

Inspecting Combustion Air Furnaces

Combustion air is necessary for burning fuel such as gas, oil and wood. For a furnace to work properly, it must have an adequate supply of combustion air. The fire triangle calls for fuel, oxygen and an ignition source to have successful combustion. In this discussion, our focus is on gas furnaces that are obtaining combustion air from inside the home. These would include natural draft and induced draft furnaces. For simplicity, we will use the example of a conventional gas furnace, even though these systems have not been installed in a very long time. Any of these you see in the field are typically near or past their life expectancies.

Natural-draft Burners
Burners in conventional gas furnaces are natural draft. This means that we are not blowing any air into the combustion chamber to create an artificial draft condition (this is forced draft), nor are we pulling air through the combustion chamber on the exhaust side, again creating an artificial draft condition (this is induced draft).

Need 30 Feet of Air For Every Foot of Gas 
Furnaces need both combustion air and dilution air. The requirements are about 15 cubic feet of combustion air and 15 cubic feet of dilution air for every cubic foot of gas burned. Since a cubic foot of natural gas contains about one thousand BTUs, a furnace that fires at the rate of 120,000 BTUs per hour would use 120 cubic feet of gas if it fired constantly for 60 minutes. This means that it would use two cubic feet of gas per minute.

We need about 60 cubic feet of air per minute (30 x 2) to ensure proper operation of this furnace. This is similar to the capacity of a typical bathroom exhaust fan. If we put the furnace in a closet and seal it off, it won’t have enough air to work properly. 

Not Enough Air 
The available air in a closed room 5 feet by 5 feet by 8 feet tall is 200 cubic feet. This would be consumed very quickly by a furnace firing at this rate. If the room could not easily replace the air, the room and the furnace would be under negative pressure, relative to the chimney.

Implications 
The implications of inadequate air are significant. The incomplete combustion process will generate carbon monoxide (the poisonous gas). Further, the lack of dilution air is likely to result in backdraft. This means that combustion products can’t go up the chimney but are dumped back into the room, which is under low pressure (since it’s starved for air, because we’ve pulled all the air into the furnace for the combustion and dilution process). Some people call backdrafting spillage.



Strategy for Checking for Spillage
When a furnace is operating, it’s easy to look for spillage or backdrafting through the draft hood. Some people use a match or smoke candle. However, in most cases you can tell simply with your hand. When you put your hand into the base of the draft hood, you should feel cool room air being drawn in. If you feel hot, wet exhaust air coming down onto your hand, spillage is taking place. With a little bit of practice, you can readily identify this. Don’t mistake the radiant heat from the hot flue as a downdraft. 

Spillage on Start Up Normal
It’s normal to have a little bit of spillage when an appliance starts up. The heavy column of cool air in the chimney has to be overcome for the appliance to vent properly. Until the chimney is warmed by the exhaust products, spillage may occur. This should be overcome within the first minute or two of operation.


The staining is evidence of backdrafting as a result of negative air pressure in the home.

Condensation 
Another indication of spillage is condensation. Because one 
of the products of combustion is water vapor, the exhaust products will condense as they come back into the room. The dew point of combustion products is around 125°F. As the gas is cooled, it may cause quite a bit of condensation. Rust around the draft hood may indicate a chronic spillage (backdrafting) problem. Corrosion is a common result of condensation.

Slow Exhaust Movement 
Condensation may also occur if the draft is marginally adequate. If the gases don’t move quickly enough through the vent connector and up the chimney, they may cool below their dew point and condense although the exhaust products eventually get out of the building. This is usually the result of a furnace too small for the chimney or an appliance firing at too low a rate to have the venting system work properly.

Poor Draft or Obstructed Chimney
Both a blocked chimney and a downdraft in an open chimney will create spillage when the appliance is running. Using this test when the appliance is off, you can get an idea of which condition is causing the problem. In some cases, you can look up or down the chimney and see an obstruction. The obstruction may be in the vent connector (the pipe leading from the furnace to the chimney).

Enclosed Space
Combustion air is usually considered readily available from the house air as long as the furnace is not in a small enclosed space. Where the furnace is so enclosed, openings in the room should be provided to ensure there is adequate air.

What’s an Enclosed Space?
When a furnace is in a room that has less than 50 cubic feet of air for every cubic foot of gas (1,000 BTU/hr), vents are needed in the room. The openings have to allow access to a space that has an adequate volume of air. It does little good to add openings to an adjacent small space. You have to consider the sum of the BTU/hr of all the appliances within the space.

Opening to Outdoors 
One of the other ways to get adequate combustion air to the burner is with an opening to the outdoors from the furnace room or enclosure. Where the furnace is in a basement, crude ductwork typically runs from the screened hole in the outside wall down to near the floor level, close to the burner. In some cases, a trap is created to minimize the cold draft. In this case, one square inch of opening is required for every 4,000 BTU.



The causes of inadequate combustion air include the following circumstances:

• The furnace is in a small enclosure that cannot provide adequate combustion and dilution air.
• The house is too tight.
• There are too many other pieces of equipment exhausting air (kitchen and bathroom exhaust fans, clothes dryers, water heaters or fireplaces, for example) to provide adequate combustion and dilution air for the furnace.

The implication is incomplete combustion and carbon monoxide entering the house. This is a life-safety issue.

Inspecting a Tankless Water Heater

Tankless water heaters have been used extensively
in Europe and other parts of the world and are increasingly gaining popularity in North America. For some homeowners, using a tankless water heater is a decision based on being environmentally conscious, while others are more focused on cost savings from reduced energy use. In certain homes, tankless water heaters are the only viable option due to limited space available for mechanical equipment. Whatever the reason, tankless water heaters are here to stay. As inspectors, you should be familiar with the basic operation of these systems.

Description
As the name suggests, tankless water heaters have no storage capacity. They have a powerful heater that quickly heats the water when it senses flow. There are electric tankless heaters available, but most are natural gas or propane fired systems with a burner, heat exchanger, venting system and controls. The burner is ignited when it detects water flow. The heat exchanger heats the water as it passes through.




Tankless unit with cover removed— heat exchanger, burner and gas valve are visable

In residential applications, there is sometimes one such heater for each fixture that uses hot water. These use electricity, and some lower wattage units are designed to merely warm the water for hand washing. These are usually referred to as “point of use” heaters.

No Stored Water
In general, tankless water heaters cost less to operate than conventional water heaters because there is no reservoir of idle hot water. However, other factors need to be considered such as initial installation costs, maintenance issues and life expectancy.

Hot Water Does Not Run Out
Another advantage is that you will typically never run out of hot water, provided the system has been sized correctly. With a conventional tank, you can draw water off more quickly than the water can be reheated. Most of us know the feeling of running out of hot water in the middle of a shower. That will not happen with a properly sized tankless water heater.



Small Size And Location 
A third advantage of tankless water heaters is that they are much smaller than conventional water heaters and take up much less room in the house. Most are designed to hang on a wall, and many vent their exhaust products out through the side wall of the home. Some vent through the roof. In warm climates they are often mounted on the exterior of the house. Exterior models that vent exhaust from the front of the heater are available. Because they are small, they can be located in various parts of the home. Many larger homes have heaters in different areas. The advantage is that heaters close to faucets deliver hot water faster.

High Efficiency Systems 
Tankless water heaters are typically more efficient than conventional water heaters, using modulating burners, direct venting and/or condensing combustion systems. Not only do we save money by not keeping 40 gallons of water hot all the time, we get more heat out of every cubic foot of natural gas we burn. However, keep in mind that many direct- vent and condensing standard water heaters are also more energy efficient than conventional water heaters.

Mixing or Tempering Valve
Many tankless water heaters include a mixing or tempering valve and a means of setting the maximum water temperature to avoid scalding. The tempering valve mixes some cold water with the hot water, leaving the unit to deliver hot water at a safe temperature to the faucets in the home. Other heaters let you set the water temperature only up to a maximum limit that is safe.

Remote Control 
Some tankless systems include a remote control that can be used to monitor the performance of the system, view error codes and change the desired water temperature.

Other Uses 
Tankless systems can also be used to heat the entire home, as part of a forced air or radiant hot water system. In cold climates, tankless systems are sometimes used to heat driveways on homes. This saves a lot of snow shoveling!



Expensive 
Although smaller than conventional water heaters, tankless systems are considerably more sophisticated, and more expensive than conventional water heaters. Tankless water heaters make a lot of sense and have been used for several decades in Europe. They are newer in North America, and there have been some issues in satisfying North American lifestyles.



Conditions
Let’s look at some of the issues with tankless water heaters. In most cases the implication is not enough hot water. The basic inspection strategy is to operate at least two hot water faucets simultaneously to ensure adequate delivery. It is good to run the water for at least two minutes and include a bathtub faucet because of the good flow rate. Some complaints include:

1. Fuel supply problems
2. Scale buildup
3. Longer wait
4. Limited flow
5. Minimum flow rate problem
6. Cold-water sandwich (burst of cold water in the middle of running hot water)
7. Relief valve problems
8. Filter problems
9. Reliability and maintenance issues

We won’t be able to discuss all of these in detail, but let’s go over the two common complaints: Longer wait and maintenance issues.

Longer Wait
When a hot water faucet is turned on, it may take longer to get hot water with a tankless water heater than a conventional system. Tankless water heaters are typically activated by flow through the hot water side of the system. A hot water tap opened just a little bit may not create enough flow to turn the water heater on. The flow through the hot water side of a system with a tankless heater may be lower since, instead of the water passing through a large tank, it passes through a coil wrapped around a heat exchanger. This creates a more restrictive path for the water. More friction loss means less flow. This can be a nuisance but is not a critical problem. Better tank locations and multiple tanks can help resolve the issue. On-demand hot water circulating systems can be added to provide hot water more quickly.

Reliability and Maintenance Issues
Conventional water heaters are relatively simple and inexpensive. Tankless water heaters are more expensive and more complex. More frequent repairs and higher maintenance costs may be expected. Some home inspectors advise customers to expect more maintenance issues with tankless water heaters and recommend a service contract that includes regular maintenance.

Despite the problems that homeowners may face with tankless water heaters, there are many benefits such as size, energy efficiency and reduced energy costs. We can expect these systems to continue to improve and remain a popular option for many homeowners. Due to their complexity and importance to the occupant, home inspectors need to gain a good understanding of how they work and what things can go wrong.

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