With the price of airfare, gasoline and, well, just about everything else these days, there’s plenty to worry about. Needlessly high energy bills at your second home — your vacation home, where there should be no worries at all — should not be on that list.

According to the Department of Energy’s “Energy Savers” booklet (available at www.energysavers.gov), American households spend 31 percent of their home-energy costs on heating the space, 12 percent on cooling and another 12 percent on heating water. There are simple steps you can take in your second home, though, to make sure those numbers fall.

“One of the first things we need to do is make sure the ductwork is not leaking, especially in attics,” said Kent W. Peterson, chief engineer of P2S Engineering in Long Beach, Calif., and a past president of the American Society of Heating, Refrigerating and Air-Conditioning Engineers. This is easy to do, he said. Just feel for hot air leaks near the ducts when the unit is running. He also recommended feeling for drafts by windows and doors, and making sure any weatherstripping you have is not cracked or broken.

Ronnie Kweller, a spokeswoman for the Alliance to Save Energy, notes that sealing your house with weatherstripping and caulking, in combination with sufficient insulation, can save up to 20 percent on heating bills in winter and cooling bills in summer. (To check on whether you have sufficient insulation, you can consult the North American Insulation Manufacturers Association’s site, www.naima.org).

Once you have the house sealed up, turn your attention to the heat itself. “Invest about $100 in an Energy Star programmable thermostat,” Ms. Kweller said. “It can pay for itself in a year.” By programming the thermostat so that the heat goes down during the hours that the house is empty and only rises about an hour before you get there, you can save up to 10 percent on heating bills. “For a second home,” she added, “if you’re there on the weekends, you could definitely program it so that it’s a cooler temperature during the week, and set it to come on at 6 p.m. on Friday.”

Mr. Peterson breaks down the numbers. “Your heating load is directly proportional to the difference between outside and inside temperature,” he said. “If it’s 10 degrees colder outside than you want it to be in your house and you can live with the thermostat being one degree cooler, you would save 10 percent on your energy. If it’s 20 degrees colder, then it’s only 5 percent if you lower it one degree.”

The same logic applies to the water heater. “We recommend turning the thermostat on the tank down to 130,” Ms. Kweller said. Mr. Peterson goes even lower: “Normally if a water heater is set at 115, that’s plenty hot to get nice hot showers.”

Finally, one of the easiest ways to save money on energy bills is to unplug things. “People don’t realize how much energy appliances use when they’re not being used,” Mr. Peterson said. “The amount of energy the microwave oven consumes 24-7, 365 days just to run that little clock is more than you’d use running the microwave to cook.”

Now extrapolate that to a TV on standby, a DVR on standby, and a stereo system on standby — all of these items consume watts even though the switch is off. “So people who leave their house, I would highly recommend you unplug those appliances,” he said. If you have any appliances on a power strip, your job is even easier: just turning off the power strip will cut all power to the system. (You may, however, have to reset these devices the next time you want to use them.)

But wait — there’s more! Taking these energy-saving precautions doesn’t just save you money by lowering your bills. It’s about to save you money through energy efficiency federal tax credits (recently reinstated by Congress, after expiring in 2007).

“Potentially, folks can save up to $500 on their federal income tax if they wait until Jan. 1 to purchase items,” Ms. Kweller said. “Some are high-ticket items like Energy Star windows and boilers; then there are some lower-ticket items like products to seal up the home.” Even better, if you didn’t use all of the tax credit owed to you between 2005 and 2006, you may be able to claim the unused part in 2009. (Go to www.ase.org/taxcredits for more information.)

How’s all that for lowering your worries?

These are several kinds of inspections you should have before you close on a new or existing home.

You’ll want to have a professional home inspector come through to scrutinize the property and give you an overall diagnosis as to its physical condition. If the inspector finds that there may be other issues, you’ll need to hire other kinds of inspector “specialists” to take a deeper look.

These other in-depth inspections could include a radon inspection, heating and air-conditioning inspection (sometimes you just need a heating contractor to go over the HVAC system), a lead inspection, asbestos inspection, and if you own a house with synthetic stucco, you might need an additional inspection with an inspector who has extensive training in detecting and measuring moisture infiltration in a house.

These inspections will run you anywhere from $300 on up — and if you need a bunch of special inspections, your final tab could be a lot higher.

But one very important inspection doesn’t have to cost you anything: a preclosing inspection, also known as a final walkthrough for a new construction home or a preclosing walkthrough for an existing home.

Most first-time home buyers don’t realize that they should make sure they have the right to perform a preclosing inspection when they make their initial offer. Just about everyone understands that they can ask for a professional home inspection (and you’d be foolish not to take advantage of that). But too many first-time buyers aren’t told that they should require the right to a second, preclosing inspection.

The point of a preclosing inspection in an existing home is to make sure that the sellers have moved out and have left the property basically in the condition it was when you signed the offer to purchase weeks or months earlier.

Ideally, the preclosing inspection will take place after the sellers have moved out of the house and before you’ve actually closed on the property. In most cases, a preclosing inspection will happen in the final hours before settlement, although sometimes it happens the day before.

By inspecting the premises, you’re protecting yourself and your future property from sellers who aren’t as nice as they seem to be or who are actually as nasty as they appear. By doing a final walkthrough, you’re ensuring that the sellers have lived up to the agreements in the contract. And if they haven’t, you’ve found out in enough time to make sure the appropriate remedies (monetary and otherwise) can be agreed upon before money changes hands.

What should you look for in a preclosing inspection? Again, make sure nothing has changed since the last time you walked through the property: turn on every appliance; open doors; make sure nothing is broken; be certain everything the sellers agreed to leave is there and in good shape; be certain that when the sellers moved out they did no damage to the property.

You should also be sure to carefully inspect the basement or crawl space to make sure there has been no leaking or mold growing. If the basement floor or ceiling has been freshly painted, it should be a red flag. Likewise, if any painting has been done (other than that agreed to in the contract), you should ask a lot of questions.

When you’re purchasing a foreclosure or short sale, it’s especially important to make sure the property is in the same shape it was when you made the offer. If something has changed, you’ll want to know so you can approach the seller or the lender (if the lender has foreclosed on the property) before the closing and negotiate some sort of remedy at the closing.

If something has changed, or is missing, take a digital photo and make a detailed list so you can present it at the closing to the seller or lender.

When it comes to new construction, you’ll be looking for different things at the preclosing inspection. You’ll want to be sure that everything the developer promised would be done and installed actually has been and is working. This includes landscaping, doorknobs, doorbell, window screens, fixtures, appliances, etc.

You’ll want to make sure all of the light outlets work in every room, so bring a hair dryer, radio, nightlight or outlet tester with you (which will tell you if the outlet has been wired correctly) to the inspection.

Make sure everything has been painted. Turn on the water in the showers and sinks and flush the toilets. If there is a garage, make sure the garage opener works. Take detailed notes on anything that is missing, loose (like tile in the bathroom) or not working so you can construct a very specific “punch list” of these items that will be included in the closing documents.

You should also make sure that the major mechanicals are working in the home. Make sure that the heating system is operating properly and that the air-conditioning system is working as well as the hot water heater.

Preclosing inspections give you your last opportunity to make sure that the property is in the same condition (except for normal wear and tear) as the day you bought it or that it’s in the condition it’s supposed to be in when you are buying a new home. So, show up early to your preclosing inspection and leave lots of time.

After all, this is likely going to be the biggest purchase you’ve made to date.

Many mortgage borrowers are tempted to finance their closing costs, that is, adding the costs to the loan amount. This could be attractive to borrowers who can earn high returns on their free cash, or those who don’t have any free cash. Financing closing costs is very costly, however, if the larger loan increases the price of the mortgage.

This will happen if the loan amount crosses a “pricing notch point” (PNP) — a point at which the interest rate, points or mortgage insurance premium increases. Since any price increase will apply to the entire loan, not just the increment used to finance closing costs, it will make the increment extremely costly.

For example, suppose financing $8,000 in closing costs on a $400,000 loan takes the loan past a PNP where the mortgage insurance premium jumps by 0.25 percent. The additional premium amounts to $1,020 in year one alone, of which $20 is on the $8,000 loan increase and $1,000 is on the original $400,000.

On conventional loans, PNPs in the ratio of loan amount to property value are 80 percent, 85 percent, 90 percent, 95 percent and 97 percent. As an example, if the $400,000 loan is 80-83 percent of value, adding closing costs of $8,000 to the loan won’t affect the price because the ratio will remain below 85 percent. But if the initial ratio was 84 percent, adding the $8,000 will bring the ratio above 85 percent, so the price of the loan will be higher. On FHAs, the only PNP at this writing is 95 percent.

The conventional loan amount also has a PNP at the largest loan that can be purchased by Fannie Mae and Freddie Mac, called the “conforming loan limit.” Above the loan size maximum, the loan price will be higher. There used to be only one nationwide maximum, but now the maximums vary from county to county and range from $417,000 to $729,750. You can find the maximum for your county at http://www.ofheo.gov/media/hpi/AREA_LIST.pdf.

Don’t Wait to Pay Off a Collection Account

I am frequently asked whether, prior to applying for a mortgage, it is a good idea to pay off old collection accounts so they will no longer appear in the credit record. This turns out to be one of the trickier issues that arises in connection with credit scores, and I consulted with my credit guru, Catherine Coy, to make sure I had it right.

Borrowers should understand that paying off a collection account, like bringing a delinquent payment current, does not remove it from your credit record. As time passes, the impact on your credit score of an adverse item in the report gradually declines, because older information is less predictive of how good a credit risk you are than more recent information. But the adverse item does not disappear.

That’s why Catherine advises people who decide to pay old collection accounts to negotiate with the collection agency to get a “delete letter” sent to the credit reporting agencies. In effect, the letter states that it was all a mistake and the adverse item should be removed from the record.

When a borrower pays an old collection item, not only does the item not disappear, but the payment converts it into a current item, which increases its weight in the credit score. As a result, paying an old item, unless it is also deleted from the record, reduces the credit score!

The moral is very clear. The time to pay off old debts is well before you expect to be in the market for a mortgage. If you wait until just before you enter the market, the genii who scores credit will penalize you as one who disregards obligations until they need additional credit.

An Interest-Only Loan Cannot Pay Off Sooner

One of the most common myths that loan officers foist on prospective borrowers is that, if the borrower makes the same payment on an interest-only (IO) loan that he would make on the same loan without the IO option, the IO version will pay off sooner. This is nonsense. If the interest rate is the same on both, they will amortize in exactly the same way. And if the IO carries a higher rate, which is very likely, it will amortize more slowly rather than more rapidly.

Will 2009 boom or will it be more doom and gloom?

Now you’re probably thinking: “A real estate boom in 2009? You’ve got to be kidding!” While the market may not exactly boom in 2009, there are a number of factors that may signal a dramatic improvement over the next 12 months. Here’s what’s happening that could make 2009 better than anyone anticipates.

1. The 10-year real estate cycle
All markets are cyclical. While markets differ dramatically, a 10-year cycle is common in many places. The Southern California market provides an excellent illustration. In 1960, 1970, 1980 and 1990, the real estate market was at its lowest point plagued by excessive inventory, foreclosures and short sales. By 1994, the market had stabilized from the downturn in the early 1990s. As market values were beginning to climb, the Northridge Earthquake hit. Extensive damage throughout the area sent the market into a tailspin. It took another three years for the market to stabilize again. The beginning of the next upswing began in earnest in 1998. The market peaked in 2005 — seven years into the cycle — and then began the current downward trend.

Given a 10-year cycle, California should be pulling out of the bottom and be on its way to a more normal market. This appears to be happening, despite the financial meltdown. The California Association of Realtors reported a 63 percent increase in sales in September. Radar Logic reports increases of year-to-year sales (2007 to 2008) ranging from a low of 16.3 percent in San Jose to a high of 74.3 percent in Sacramento. DataQuick reports that September sales were up from a low of 29.4 percent in Ventura County to a high of 106.1 percent in Riverside County as compared to September 2007. Mike Kelly of Keller Williams Sonoma reports that his market has only two months of foreclosure inventory and about four months of short-sale inventory. Foreclosures and short-sale inventory are rapidly being depleted in other areas of the country as well. As this inventory disappears, prices will stabilize and will eventually begin to rise.

2. Pent-up demand
Across the country, sellers and buyers have been telling their agents that they are waiting for the presidential election to be over before they buy or sell any real estate. Now that the presidential election is in back of us, the bailout is in motion and the most recent stock market plummet seems to have passed, look for a substantial uptick in buyer and seller activity. People still marry, have children, retire and have to relocate for their jobs. Many of them postponed selling or buying waiting for market conditions to improve. Look for this pent-up demand to make its way into the market in 2009.

3. The credit crunch eases
Credit is still tight. As one loan officer put it, “We’re back to qualifying buyers the way we did in the 1980s. If you don’t have a credit score of 740, forget it!” The bailout in conjunction with the new guidelines for FHA, Freddie Mac and Fannie Mae will result in more money in the system. Many credit unions are flush with cash and some are even making zero-percent-down loans to highly qualified buyers. As credit eases, buying and selling becomes easier. This will be particularly true in the jumbo market where highly qualified buyers are still having problems obtaining financing.

4. Inventory and days on market decline
The amount of inventory and the “days on market” statistics are the best harbingers of market changes. Prices always lag behind these statistics. When there is a strong seller’s market with upward pressure on prices, there may be only two or three months of inventory. Price stability normally occurs when there are six to eight months of inventory. Thus, when there has been a shortage of inventory, it can take 12 to 24 months before the market recognizes that there is an oversupply. The converse is true for a buyer’s market with downward pressure on prices. Unless you’re tracking inventory and days on market, you may not be aware of the shift until months after it started. Currently, inventory and days on market are dropping in many areas.

5. Demographics
In 2008, the size of Gen Y (born 1977 to 1994) surpassed the size of the Baby Boom generation. Gen Y wants to own real estate. Some researchers claim that there will be a boom in the Gen Y “Mommy Market.” While members of Gen X (1965-1976) are delaying both marriage and children, the typical Gen Y mom currently has 2.7 kids. This population explosion is being lead by Latina and Asian women. Gen Y is just now beginning to hit their early 30s, the time when they are most likely to buy their first home. On the other side of the coin, baby boomers (born from 1946-1964) are most likely to buy a second or a retirement home between the ages of 50 and 60. While builders have cut back substantially on the numbers of new homes being built, an increase in future demand and a limited inventory will result in higher prices.

The question is not whether there will be another real estate boom — there will be. The real issue is how long it will be before it starts. Watch your local market’s inventory levels and days on market to see what your future will hold.

Frustrating. That’s what it is. At a time when homes — especially second homes in some regions — are dropping in price, it’s getting harder to get a loan to buy one. Banks, naturally skittish after this year’s mortgage crisis, are tightening their purse strings, and it takes a lot to tug them open.

“The interesting part is that you’re going to get some of your best buys in your second-home markets right now,” said Marc Schwaber, president of Preferred Empire Mortgage. In his own search for a property in Florida, Mr. Schwaber has found prices that have dropped 50 percent in the past two to three years. “The second-home market in many ways holds its value really well, and people want second homes. But banks can’t seem to ease up on their guidelines.”

The caution is understandable. “Look at it from a lender’s perspective,” said Eric Tyson, a former financial adviser and co-author of “Home Buying for Dummies.”

“It all comes back to what is the risk of defaulting on the loan? And worried lenders are finding out today how high the default rate can be on homes in which people live. If it’s a second home, and not even your primary residence, there’s potentially even more temptation and ease to walk away from a property.”

But, Mr. Schwaber added, “It doesn’t matter if it’s a primary or second home.” To him, the more pressing concern for banks is: Does the client fit the ratios?”

“I’ve been in this business since the mid-’80s — the old rule of thumb was called 28-36, which meant that you could spend 28 percent of income on primary housing expenses and 36 percent of your income over all,” Mr. Schwaber said. “Is it easier for primary or secondary? The answer is your secondary home has to fit into a certain ratio. Each bank these days sets guidelines for their ratios, and there’s no such thing as 28-36 anymore.”

Instead, he continued, banks look at a range of factors, including income, assets, credit and post-closing liquidity. “If you have a tremendous amount of post-closing liquidity, and can put a good amount of money down,” he said, “would that not qualify you differently than someone who may be able to put a lesser amount of money down or have less money after the transaction is complete? The banks are starting to use common sense underwriting again.”

What a strange concept, right? “Lenders are doing what they used to years back,” Mr. Tyson said with a laugh, “which is that they’re making loans with people they think have a very high probability of paying them back. And they’re actually getting down payments from people again, and realizing that if someone has 20 percent down payment on a property, they’re far less likely to walk away from it.”

What this means for buyers is that they’re going to face tougher lending criteria. “People can expect their financial situation will very much be scrutinized, and they’re going to have to put up a pretty reasonable-sized down payment,” Mr. Tyson said. “Probably on the order of 20 to 30 percent.”

To bolster your chances, examine your credit reports. Then, research the mortgage criteria of different banks. “One bank may have the best rates in the world and might have much tougher guidelines,” Mr. Schwaber said, “where another may have slightly higher interest rates, but they’re a little more lax on their guidelines.”

Also, Mr. Tyson cautioned, more than ever, make sure you can really afford that vacation spot. “You should take a look at your overall financial situation,” he said, “and be realistic about how your cash flow’s going to change once you have the burden of second property.”

Most important, don’t be fooled by what a lender may tell you. “I’ve long said that if a lender tells you that you can borrow up to $300,000, that doesn’t mean you can really afford that,” Mr. Tyson said. “The lender’s not going to look at how many kids you’re going to put through college or if you’re caring for elderly parents.

“That’s why you need to look at the overall financial situation yourself. If a lender’s not willing to make you a given-size loan, that’s probably a good sign that you can’t afford it. But just because they’re willing to lend you the money, doesn’t mean you can afford it.”

Like all disasters, the financial crisis has its share of beneficiaries who profit from it. One of them is the hard-money lenders, who lend strictly on the basis of the collateral. These non-institutional lenders require a lot less paperwork than institutions because they don’t worry about whether or not borrowers can afford the payments, or whether or not they are creditworthy. They don’t bother with income, employment or credit reports.

If borrowers can’t pay, the hard-money lenders get their money back through foreclosure. They typically require 30-35 percent down to make sure that there is enough equity available to cover foreclosure expenses. Interest rates are much higher than those charged by institutions, and terms are short.

The earliest mortgage lenders of the 19th century were focused entirely on the collateral. Of necessity, they were hard-money lenders. There was no way to document anyone’s income in those days, and credit reporting had not yet emerged.

Over the decades, loan underwriting increasingly came to emphasize the capacity of borrowers to repay their mortgage as indicated mainly by their incomes relative to their expenses, and their willingness to repay as indicated by their credit record. Rules regarding how both the capacity and willingness to pay had to be documented came to fill many pages of underwriting manuals. As collateral became less important, down-payment requirements declined, and in many cases disappeared entirely.

Hard-money lending today is thus a throwback to the era before the capacity and willingness of mortgage borrowers to repay became important parts of loan underwriting.

The financial crisis has been good for hard-money lenders because it has made loans with less-than-complete documentation of income and assets very difficult to obtain from institutional lenders. Here is a recent example.

“I bought my permanent residence for $300,000 in 2005, paid all cash, but now I need $80,000 to make repairs and can’t find a loan. I live off the income from other properties that I own, but I show very little income on my tax returns because most of it is shielded by depreciation and interest costs … None of the lenders I have approached will give me a loan.”

Before the crisis, this borrower would have had no difficulty finding a “stated-income loan,” meaning one where the borrower stated his income but was not required to document it. Indeed, the stated-income loan was designed to meet the needs of exactly this type of borrower. The interest rate would have been only 0.25-0.5 percent higher than the rate on a fully documented loan.

But as underwriting rules loosened during the go-go years 2000-2006, stated-income loans came to be called “liars’ loans” because they were so often used to qualify borrowers for mortgages they could not afford. The presumption was that rising home prices would allow them to refinance to a lower rate later on, or if necessary, to sell the house at a profit. Instead of reflecting real income that could not be documented, stated income often reflected income that did not exist.

As the financial crisis emerged and foreclosures mounted, hostility against liars’ loans grew. The notion took hold, among regulators, legislators and even many loan providers that every mortgage borrower should be required to document his or her ability to repay the mortgage. While to my knowledge none of the attempts to enact this rule into law were successful, the market’s response to the crisis has done the job for them. Stated-income loans have become difficult or impossible to obtain from institutional lenders.

So I had no choice but to advise the letter-writer to find a hard-money lender. The rate premium, relative to the cost of a documented loan from an institutional lender, will be much higher than 0.25-0.5 percent. As partial consolation, there are a lot of them — when I entered “Pennsylvania hard-money lenders” in Google, more than 400 entries came up. Hard-money loans should be relatively easy to shop because their rates don’t bounce around from day to day, as they do in the institutional market. I don’t have any experience with this market, however, and readers who have taken loans from hard-money lenders are invited to let me know how they did.