Do you get what you pay for? Or do you pay more for what you get?

A homebuyer recently bought a house in an area near where I live. He paid the special (lower) preconstruction price and, endowed with an inheritance, he paid for several costly upgrades. When the house was built the buyer discovered that, but for the kitchen and bathrooms, the tile flooring hed ordered throughout the house had become mediocre carpeting. He paid for pricy Corian kitchen countertops and got Formica instead. The screen-enclosed patio became an open patio. The bedrooms were two and three feet smaller than had been agreed upon. The builder blamed the necessary adjustments on rising costs of everything due to that old black magic, oil. The enraged homebuyer, who should have kept a closer surveillance during construction, is suing the builder.

A young couple with their first child had finally saved enough of a nest egg to purchase a home. They had specifically requested a plain vanilla 30-year mortgage. Unaccustomed to reading all those nasty closing documents, they nearly missed the item that indicated a 30-year, 10- year interest only ARM (adjusted rate mortgage). At the end of ten years the interest rate could be in the stratosphere. Having paid interest only, or even a tiny bit of principle for the first 10 years, the couple would have had all that principle to pay off at a higher interest rate and still have no equity.

You really need your wits about you in the minefield of brokers, bankers and wannabe buyers. Prospective homeowners are encouraged to buy into creative mortgage loans such as ARMS, home equity loans called HELOCs, and interest only loans without completely understanding them. Ive seen ads that shout out: Will pay all closing costs. Will pay your first six months mortgage. Well pay the first $2,500 of your closing costs. Dont Worry About Your Credit. Lenders are in business to make money. They dont tell you about the hidden fees, they dont tell you that you will be paying a much higher interest rate to make up for your not so good credit or their commissions. In the end you will be paying more, not less and it is all perfectly legal. If a variable rate mortgage is what you want, thats okay. Just be sure you are getting what you asked for, understand it and can afford it.

In the investor frenzy during the housing boom, the state of Florida had hundreds, maybe thousands, of condominium conversionsrental apartments that became condos. Not a good idea for someone who wants a home rather than an investment. In purchasing a condo that previously was a rental, the buyer has no way of knowing whether the original structure was built by the same standards that are applied to single family homes, town homes or condos designed for individual ownership. In most rentals you will find rough concrete underneath inferior grade carpeting; the walls may not be properly insulated, the window fittings might not be up to higher standards. These features are extremely vital in areas subject to weather extremes. Now many of those condos are reverting back to rentals because the bubble has begun to run out of fuel, and investors who got in too late or were greedy are being treated for migraines.

With interest rates ticking up and home prices falling or at least leveling off, is now a good time to buy a home? Judging from the scary number of nationwide defaults today, owning is not for everyone. If you are not paying off your credit card bills each month, you are getting deeper in debt. The pundits tell us that it is better to own than to rent. They say renting means throwing your money down the rat hole, whereas owning allows you to build equity. Yes. But have you ever made your way up to the cashier at the supermarket and asked if you can pay with the equity from your house?

My theory is, unless you have discretionary funds, you should not buy a house. Repeat after me. I will always, always save extra cash for the money pit (house). The money pit will require repairs; the money pit will want adornments. Along with the adornments the money pit will most certainly demand better security protection. Destructive weather patterns being what they are, the money pit will scream for storm shutters. Down the line, are roof repairs, outdoor property enhancements and all the myriad stuff you never considered back when you opened that bottle of Champagne.

Unless prices come down (they never do) and salaries rise (been flat too long), the American Dream for the American middle class might be just a dream.

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