The current housing crisis has definitely changed the "rules" of home buying. As a result, home buyers in this country have become increasingly confused and frustrated. Many people simply don't know how we got to this point, what the housing crisis means to them, and where we are headed in the future.

I can't help with the future aspect of it -- my crystal ball is broken at the moment. But I can help you understand the history of our housing crisis and how it affects you in the present. Let's start by taking a look back...

Real estate is a perpetual cycle of ups and downs. But once in a while, certain factors combine to create a "perfect storm" of housing bust. This is what we saw at the end of 2008. But while many factors have led to our housing crisis, most economists point their fingers at one cause above all others -- the subprime mortgage market.

As the name implies, a "subprime" loan is one given to a person with a bad credit score. Because of this low score, the borrower will not qualify for the best interest rates and will be given a rate that is below prime, hence the term subprime mortgage.

Now take this concept and multiply it many thousands of times over, and you will begin to see what caused the housing crisis in this country. Despite warnings from economists in the mid 1990s and early 2000s, these subprime loans were given out in staggering numbers.

Often, the lenders would downplay the risks associated with them, and would offer a low "teaser" rate for the first few years of the loan. After the adjustment period, however, the interest rate on the loan would skyrocket. Many people found they could no longer afford their mortgage payments. So then we saw record numbers of home foreclosures sweeping across the country.

This is not a post about who's to blame. But, if forced to point a finger at somebody, I would say the blame could fall equally onto three groups:

         The lenders who downplayed the risks of subprime ARM loans (blinded by greed).

         The federal government who looked the other way (blinded by all of those campaign contributions from the lenders). 
         The home buyers / borrowers who did not do enough research (blinded by the desire to own a home).

(Sorry, kind of  Catty of me, but I'm tired of Realtors taking all the blame :-)

When you buy a home, your mortgage lender will require a homeowners insurance policy in order to protect their interest in the home. In most cases, the lending institution owns most of the home during the first years of the home, until the homeowner gains equity. So it only makes sense that lenders want to protect their investment in the home.

But this policy protects your investment in the home, as well. It gives you peace of mind that, in the event of a loss, you will be covered in some form or fashion. So you should make sure you get solid coverage from a reputable insurance provider.

With that being said, it sure is nice to save money wherever possible. And this goes for insurance policies as well. Here are some of the ways you can lower the overall cost you pay for a homeowners insurance policy.

Compare Insurance Companies

When you compare one provider to another, you are doing two important things at once. First, and most obvious, you are finding out who offers the lowest rates for a comparable level of coverage. Secondly, you are learning about the different types of coverage these companies provide, including the many components that make up a policy, the terminology associated with it, etc. Both of these items are important when trying to lower the cost you pay out of pocket.

Save Time by Using the Internet

The good news is that you can conduct much of the above-mentioned research fairly easily, just by using the Internet. In the past, you had to make a lot of phone calls (or even office visits) to compare insurance companies and policies. There are many big insurance websites that allow you to do this. But as always, watch out for scam websites that ask for too much personal information up front.

Another benefit to getting a home insurance quote online is the speed factor. Using the Internet, you can accomplish in a few hours what used to take a few days or even weeks.

Improve Your Credit Score

These days, in the wake of the subprime mortgage crisis of 2007 - 2008, it's more important than ever to have a good credit score. For one thing, mortgage lenders require that borrowers have higher scores these days to get the best loan rates. But there's another good reason to maintain good credit. Many insurance companies are beginning to use this factor when determining the price for policies.

Raise Deductible to Lower the Costs

The deductible is the money you would pay toward a loss before your insurance policy would cover the rest. If you have coverage on your car, you are probably familiar with the concept of deductibles. It's the same basic concept with a homeowner policy.

You can lower your premium by raising your deductible amount. Many financial experts recommend doing this as a way of lowering premium costs. The logic is that you know for certain that you'll pay the premium on your policy, but there's only a small statistical chance of suffering a loss and having to file an actual claim. So this approach seeks to lower the amount you know you're going to pay (the premium) by increasing the amount you may never have to pay (the deductible).

What Does a Home Inspector Do?

In short, an inspector checks the safety and functionality of your potential home. He will focus primarily on the structural and mechanical aspects of the home (as opposed to cosmetic or aesthetic items).

It's a good idea to get a home inspection as soon as possible after the seller accepts your offer. This will help you determine if there are any major problems with the property -- and sooner is better than later. You should also make the purchase agreement / contract contingent upon the home inspection. That way, if the inspection uncovers a major flaw that you're unwilling to accept, you have a legal way out of the contract.

Don't confuse this process with the home appraisal process. The appraisal protects the lender's financial interests in the property. The home inspection protects your interests, as the buyer. The appraisal is the bank's way of determining whether or not the house is worth the price you've agreed to pay for it. The inspection is your way of identifying structural or mechanical problems with the house. Two different things entirely.

Where to Find an Inspector

Finding a qualified home inspector is usually fairly simple. Here are some ideas:

• Ask a friend or coworker who has recently bought a home in the area.
• Ask your agent if he or she can recommend a qualified person for the job.
• Visit the American Society of Home Inspectors website at ASHI.org.
• Visit the National Association of Home Inspectors website at NAHI.org.

When you find a candidate, ask how many home inspections he has done. Also ask what certifications he carries. The person you choose should be certified by one of the national associations.

Who's Fixing What?

So you've found someone to inspect the property, and he has come back with a list of discrepancies. Now what? When you review the inspector's list with your agent, you'll have to decide which items (if any) you want the sellers to repair. Like nearly everything else in the home-buying process, the fix-it list is negotiable. When you submit your list of requested repairs to the sellers, you face one of several outcomes:

1. The sellers will agree to fix all of the items.
2. They will only agree to fix some of the items.
3. They will refuse to fix anything (most common in a seller's market).
4. The seller will reduce the price in lieu of certain repairs.

How you proceed in light of the seller's response is up to you, with your agent's input. A good rule of thumb -- don't ever turn a blind eye to a major repair issue just because you're excited about getting in the house. If you're an experienced investor and you're buying the house specifically to fix it up, that's one thing. But if you're buying your first home, be conservative and carefully consider each item on the inspector's list. It will benefit you in the long run.