This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide.

Buying a home is especially difficult these days, especially because it’s hard to predict what will happen next. Mortgage interest rates and home prices are at their lowest in decades, but it doesn’t mean now is the time to buy.

The real issue is whether you’re really getting the best deal possible on your home: Interest rates are low, but they could keep dropping. Prices are down, but they may not seem so spectacular in a couple of years from now. A home you would have considered a steal five years ago may be ridiculously expensive now, right? So how do you buy a home in a down market and know you’re paying what you should?

How Market Value Is Determined

The market value of a home is what a seller can expect to receive from a buyer at any given time. It’s sort of like the Blue Book value on a car–an average asking price, but not necessarily the exact amount someone would pay.

The market value is determined by a professional like a real estate appraiser or agent based on a number of considerations. These can include what homes of similar size and location have sold for in the past six months to a year, but does not factor in things like cosmetic improvements made to the property. Importantly, the market value of a home can change dramatically over a short period of time, which is why the number is not completely reliable.

How To Tell If a Home is Worth Its Price

One way many potential buyers gauge whether the property they’re interested in is a fair price is similar to how appraisers judge market value–by comparing it to similar homes for sale in the area. However, this can be misleading. According to lendingtree.com, homes that have been on the market for just over three weeks might be priced too high.

Valuation

This is why valuation is important to consider. Valuation is the difference between what a home should cost and what the actual price is. For example, CNNMoney reports in mid-2006, at the height of the housing bubble, 53 metro areas were considered to have over-valued properties. Just two years later, that number dropped to only 8.

Aim for Pre-Bubble Prices

Right now, most areas are considered to be undervalued, which means you could score a good deal on a home. Additionally, due to the recession, unemployment and high rates of foreclosure, the demand for homes for sale is weak. This means sellers are forced to cut prices even further to entice buyers.

Even if it’s already a bargain basement price, judging the accuracy of a home’s market value can still be difficult. To be sure you’re really going to get your money’s worth from a purchase and not want to kick yourself years down the road when prices drop further, judge how closely the asking price matches what you would expect in a “pre-bubble” environment.

MSN Real Estate writer Luke Mullins describes a scenario where we will return to pre-bubble prices where there was only an increase of one to two percent above the inflation rate over the next decade. This is in line with average historical appreciation rate of about half a percent every year when adjusted for inflation. So, with this trend in mind, compare the historical value of a property you’re interested in against the asking price today. Ascertain whether the two match up by starting from 1995 and adding a percentage point or two above inflation each year until you get to 2010.

Will Home Prices Continue to Drop?

Even if home prices are abnormally low now, they might continue falling, making a premature purchase more expensive than necessary. Associated Press real estate writer, Alan Zibel, explains that home values are projected to to decline well into 2011 and maybe even 2012. He writes that Moody’s Analytics senior director expects “home prices could drop another 20 percent by early 2012 if there is another recession. If the economic recovery remains on track, she sees prices falling another 5 percent and hitting bottom early next year.”

Waiting for home prices to fall further could really be a gamble, though. It seems they will trend downward at least for a little while longer, but wait too long and you might miss out on rock-bottom numbers. Homes are already priced at historical lows, so if you use the above criteria to judge a home’s true value and find you’re set-up to profit from your purchase in the future, you might want to snag the opportunity while it presents itself. Of course, missing the boat and buying on the way up will still ensure that you’re purchasing during a time when home prices will continue up.

This is a guest post from Lender411 who allows consumers to compare today’s mortgage rates in their area instantly and for free online, consumers are also matched with 4 local lenders who can take care of their specific mortgage needs and compete for their business. 

Money flows in a lot of different directions when you buy a house.  There’s the down payment, the mortgage interest, the closing fees, and numerous other costs.  But there are ways to save money in the midst of the chaos.

Compare your options.  Don’t pick a loan package until you’ve thoroughly researched at least five or six different offers.  Check out rates, fees, and terms.  Get a Good Faith Estimate (GFE) from any lender you are seriously considering.  A GFE itemizes every cost associated with the mortgage so you can see exactly how much the deal will cost.  Lenders are required by law to provide this document to you if you request it.  Don’t be afraid to negotiate, either.  It’s not hard to find the best mortgage rates if you’re willing to take some time and do some research.

Get a shorter mortgage.  The shorter your mortgage term, the less money you’ll pay in the long run.  You can save literally hundreds of thousands of dollars, depending on your overall loan amount, by going with a 15-year mortgage instead of a 30-year mortgage.  This has been financially proven over and over again.  If you can afford to make slightly higher monthly payments, get the mortgage with the shortest term possible.

Assume an existing mortgage.  If the seller of the home has not paid off the current mortgage, you might be able to simply take over the existing mortgage.  If the mortgage is transferrable and the seller agrees, you could end up with a significantly lower interest rate. Of course, you need to guarantee that the interest rate on the existing mortgage is lower than the interest rate you could get on a new mortgage, and you’ll still have to pay the difference between the home value and the current mortgage balance, but you may be able to save a substantial amount of money in lower interest over the years and you may not have to pay any closing costs at all.

Skip the mortgage insurance.  If you’re a risky borrower, some lenders may require you to pay for mortgage insurance before the loan closes.  Once you’ve taken out the mortgage and you’ve made a few payments, however, your lender will likely allow you to drop the insurance.  This can save you a great deal of money.

Pay off your mortgage early.  You’ve heard this one before.  If you can scrape enough money together, make extra payments on your mortgage as often as possible.  Tell your bank to apply these extra payments directly to the principal of the loan.  In effect, this shortens the term of your mortgage, which will lower the amount of interest you’ll have to pay over the course of the loan, as mentioned above.  Make sure your mortgage won’t penalize you for early repayment, however.  This is common.  Try to arrange a deal that allows for this.  It’s staggering how much you can save.

As I continue my research on alternative housing ideas, I find that they are so many more options that I could ever imagine. One of my favorite ideas for new housing is using recycled materials, like Phoenix Commotion. To summarize my three-part series on alternative housing ideas, below is a list of topics I’ve been focusing on:

• Topic 1: Converting old buildings, such as train depots, post offices, and even grain silos into a house.; I like the idea of repurposing an old building and making it livable. The silo idea is fascinating, too bad there aren’t many in my area.
• Topic 2: Container houses; I’ve come across this topic a few times while looking at prefab houses. I think there are some great plans out there.
• Topic 3: Building homes out of recycled materials; I’ve posted about this before, Phoenix Commotion is just one company that builds homes out of recycled materials for a very low cost. I really like the idea of incorporating recycled materials in a home.

Topic 3 – Recycled Residences; building homes using lightly used materials

I first came across this idea through Treehugger.com, they featured a small company called Phoenix Commotion. Phoenix Commotion was building houses for low-income families out of the most unusual materials, all of which were salvaged. What really caught my eye while scanning the article’s photographs was one particular wall made from the bottoms of glass wine bottles. I thought it was a most creative way to reuse old glass bottles and this got me thinking: Instead of throwing away our glass bottles, mason jars, windows, or old lumber, why not donate them for projects such as these? Apparently I’m not the only one to think this represents the meaning of reuse, recycle, reduce.

Here are just a few other amazing ideas that fall into the recycled residences theme:

• Use recycled materials to build your dream home: Eliminate the Muda posted not long ago about retiring in Detroit. Not because the city is a haven for retirees, but because the housing market is so affordable (you can still find homes for under $20,000!). But what if instead of moving there, you purchased a home then moved it to a new location? Or, purchased a deteriorating home, then used the lumber and windows for a recycled residence some place else? It could work with some creativity and hard work. *On a side note,  I’m not saying everyone should move historic homes out of the city or that the city is uninhabitable. I don’t want to cause more harm to a city that is already struggling.
• Build a Cob Home: I posted about cob homes before, when one young man spent over a year making and building his home out of straw, sand, and clay. However, there is an entire site dedicated to these types of homes. Cob homes look a little like the hobbit homes in Lord of the Rings, they are made of natural materials and are hand shaped, many in circular patterns versus today’s standard rectangular shaped house. They are durable, completely environmentally friendly, and requires no heavy machinery.
• Build a Paper House: This may seem like a ridiculous idea, just think what would have happened to the three little pigs had the third pig built a paper house! However, technology has changed the idea of paper into a more durable structure, especially when it’s shaped in the style of a honeycomb and is as thick as cardboard. Inhabitat featured a durable wall house last year that is literally made out of recycled paper. For under $5,000 an inexpensive dwelling can be built to withstand generations of use.

Summary

So many choices for homes exist today. Luckily, I have some time before I purchase or build my own little house. With an endless supply of creativity for reusing and recycling materials, perhaps my home will include some of these features. I live for the day when I can describe and showcase it! Until then, I can drool over these seemingly abundant ideas.

Would you be open to building a home out of recycled materials? What about cob?

Tiny House - Whidbey by Tumbleweed Houses

I’ve been a fan of theTumbleweed Tiny House Company for a few years now. Last Christmas, I purchased The Small House book for my father-in-law who was retiring and considering alternative housing options. At that time, I also signed up for the Tumbleweed newsletter. Recently, I had a chance to check out all the latest house plans Tumbleweed is now offering, my how they’ve grown!

A few new Teeny home designs, homes starting at 65 sq. ft. (yes, that’s right, under 100 square feet!) up to 135 sq. ft. include (all portable homes):

• The Weebee: 102 square feet of efficiency on wheels. This home doesn’t need a foundation and can be towed around on a utility trailer. Most Tumbleweed homes include a sleeping loft that isn’t included in the total square footage. Cost for this home: $48,997 ready built.
• The Fencl: The largest of the “Teeny” homes at 130 sq. ft. This home also has a sleeping area in the front of the large room and a sleeping loft above the kitchen/bathroom. It includes a black and gray water plumbing system. It sells ready-made for $53,997.

Some new Tiny home designs, these homes range between 261 sq. ft. to 557 sq. ft include (these homes are not portable, they require a foundation.):

• The Bodega: Starts at 261 sq. ft. with just a sleeping loft, add a single bedroom and increase your square footage up to 356 sq. ft. This home includes a fireplace and full kitchen and bath. The materials to build this home start at $22,500.
• New Vessica: 278 sq. ft. or 372 sq. ft. again, these homes include a loft but it is not counted as part of the total square footage. This design is new and I didn’t see a price for materials directly from Tumbleweed Houses. The plans can be purchased for $695.
• The Whidbey: 461 sq. ft. or 557 sq. ft. the Whidbey includes a small front bedroom and a sleeping loft. The loft in this plan is the entire length of the house. Since it’s not counted in the total square footage, this adds a lot of room. The estimated materials cost starts at $35,000.

Small house plans that are slightly more roomy range from 681 sq. ft. to 837 sq. ft., again these homes require a foundation (only the house plans can be purchased through Tumbleweed Houses):

• B-53: starting at 743 sq. ft. or adding a third bedroom expanding the footage to 837 sq. ft. is a larger model of the tiny Loring house plan. The Loring is one of my favorite plans, and I absolutely adore the larger model as well. Plan price: $695.
• The Ernesti: Staring at 681 sq. ft. the Ernesti has two full bedroom on the second floor. Very similar to the B-53, but slightly smaller on the second floor. Plan price: $695.

Teeny House - Fencl by Tumbleweed Houses

If anyone is seriously interested in Tumbleweed Houses, they are currently looking for someone to host the Fencl as a vacation rental this summer in the US. Click here to find out all the details if you have a site with RV hookups and sewage availability.

Also, Jay Shafer offers consultations if you’re truly interested in building your own Tumbleweed.

Could  you live in one of these homes? Would you want to try it out for the summer?

This is a guest post from Crystal of Budgeting in the Fun Stuff: A Personal Financial Blog about the Next Financial Step. It’s an open fiscal diary and a personal finance blog rolled into one.

My husband does not want to stay in our current home forever. He wants more room…specifically more rooms. After board gaming at a few different homes, he is lusting after more space. Luckily, he has a cheap streak too, so we will wait until our house is paid off before even approaching the idea of moving. But our conversation did lead me to think, how much house is enough house for us?

I’m happy with our 3 bedroom home. I love our Master bedroom with our attached bathroom. I’m cool with the fact we use one of the spare bedrooms as my husband’s office. I’m also fine with turning the other bedroom into a guest bedroom/hobby room if he’d like.

I don’t think we need a separate library, office, hobby room, guest bedroom, and gaming area.

Our friends have some pretty awesome houses. I know exactly where he got these ideas. But I also know that those same friends make way more than we do. I don’t want to suffer from lifestyle inflation.

I also hate the idea of moving at all. Buying our home was not a fun process at all. It was stressful. Even the moving part was awful since the first movers never showed up and we had to wait all day to get fit in on a different company’s schedule. I also don’t enjoy the whole unpacking process. I just hate moving.

That hatred could easily convince me to stay exactly where we are until I’m too old to go up the stairs.

I know that my husband would never put his wants ahead of our finances, but I’m already trying to come up with ways to make our house seem bigger to him. I just think that as long and the TV works and we have a table to play games on, we’re doing just fine…

What do you think? How much house is enough house for you?