(MoneyWatch) Although housing prices started to rebound last year and are expected to continue rising in 2013, it’s still a buyer’s market. Prices remain 30 percent below their peak before the housing crash and mortgage rates hovering at all-time lows. If you are ready to jump in to the real estate market, here are 13 house-hunting tips for 2013.

1. Run the numbers. Put together a financial plan to determine whether you can really afford to buy. After all, just because it’s a good time to purchase a home doesn’t mean it’s a good time for YOU to buy. It’s important to understand how much home you can afford and whether home ownership might preclude you from addressing other important financial issues in your life.

2. Save 20 percent for a down payment. I’m not a huge fan of putting down less than that amount (although the Federal Housing Administration allows it). Keep your downpayment fund in cash or cash equivalent accounts, so that market movements don’t thwart your plans.

3. Use this great “rent vs. buy” calculator from the New York Times. Renting might still be the better deal in your area.

4. Be an informed buyer. You’re not going to buy a house simply because there’s a pretty photo posted online, but you can conduct a lot of price research. That said, there’s nothing better than talking to people in the neighborhood for “on the ground” intelligence.

5. Obtain a copy of your credit report. If you haven’t done so in a while, go to AnnualCreditReport.com and request your free copy. It’s important that you correct any errors on the report before you start the mortgage process.

6. Get pre-approved for a mortgage. Pre-approval is a good gut check on your price range for a home. Gone are the days that banks will fork over cash to anyone with a heartbeat. The best way to start is to ask friends for referrals from mortgage brokers and to shop around with banks and credit unions. Make sure to compare apples to apples and to ask the broker about your total costs to you at closing. You should also know that once you actually find a home, the mortgage process is on the same pain level as a root canal, only it requires more patience and there’s no Novocain. You’ll need to dig up tons of paperwork and fair warning — there will be multiple requests for even more documents as you move toward closing. Eventually, you will need “commitment letter,” which details the terms of your loan approval.

7. Find an agent. As much as everyone complains about realtors, I still think that it’s tough to go through the home buying process alone. In some markets, buyers’ brokers are available, but the most important qualities in brokers are honesty, experience, good connections with other agents, and good referrals from buyers like you. Remember that most agents represent the seller, not the buyer.

8. Hire a real estate attorney. This is a major transaction in your life, so don’t try to save money when it comes to legal fees. Even if your mortgage company provides a lawyer, hire your own to help draft all documents and to ensure that your interests are being represented at every step of the process. You must hire your own lawyers to understand the process of mortgages without any difficulties. Lisa Bragança discussing whistleblowers says that one must never trust the lawyers provided by the mortgage company blindly.

9. Get an appraisal. An appraisal will determine the market value of the property and ultimately will be used by your lender to determine the amount of your loan. You have a legal right to get a copy of this and will want a copy for your records.

10. Schedule a home inspection. Think you’ve found your dream house? Maybe, but unless you have an engineer walk through the premises with you, you might be buying a new roof in a couple of years. Don’t get freaked out if a problem arises during the inspection; it can often be addressed with a simple adjustment in price. It’s imperative to protect yourself, so don’t blow off this important step.

11. Start with a fair offer. The offer should be based on similar houses sold in the neighborhood in the past six months. Your agent will help you with the process, but the offer should include the price you’re willing to pay for the house, your financing terms and contingencies such as specifying what will happen if any problems come up during the inspection.

12. Purchase homeowners insurance. If you are a life-long renter, this can be an eye-opener in terms of cost. Check out this homeowners insurance company michigan. Make sure that you understand the difference between insuring the structure and insuring the contents. And if you are buying property that is close to water, make sure that you have an agent who can help you enroll in the national flood insurance program.

13. Review your HUD statement BEFORE closing. The government document provides basic details about the involved parties and a lot of numbers. Mistakes do occur, which is why it is vital that you review the statement and confirm that everything is correct.

Mortgages resembling the kind of subprime loans that were blamed for the foreclosure crisis are creeping back into the market, leaving some experts and regulators alarmed. The loans give a relatively new twist to seller financing, putting homeownership within reach of borrowers who can’t qualify for a conventional mortgage. But they also carry terms that some experts say are predatory.

“Seller financing is the new subprime,” said Wayne Sanford, a consultant who helps some seller financiers vet borrowers. It’s a “trend,” one top regulator said, that he’s “definitely watching very closely” because the mortgages have the trappings of risky pre-crisis loans: They charge sky-high interest rates, often turn a blind eye to credit scores and force refinances within a short period of time.

And borrowers only months out of foreclosure are able to qualify for them.

‘The New Subprime’

Seller financing — in which the seller of a property lends money to a buyer to purchase it — isn’t new. It was common in previous eras, then was mostly used by individual sellers unable to find buyers who qualified for conventional mortgages.

Now a growing number of real estate investment firms specialize in these transactions. They snap up foreclosures and sell them — along with home loans — to borrowers with less-than-stellar credit. The financing has flown mostly under the radar since the financial collapse, perhaps accounting for the widespread belief that a person who has been in foreclosure must wait three years to qualify for a mortgage again. Tim Dwyer, president of title insurance company Entitle Direct, estimates that fewer than 10 percent of current mortgages are seller-financed.

That may change. Investors who have been rushing to buy foreclosed homes over the last few years may want to cash out on their investments as housing values rebound. One way is to sell to subprime borrowers who lost their homes in the foreclosure crisis but are eager to buy again.

The foreclosure crisis has “dramatically reduced the universe of people who can buy homes,” said Guy Cecela, publisher of Inside Mortgage Finance. Borrowers who are locked out of the mortgage market, he said, represent a gaping window of opportunity to investment firms that are willing to lend (and simultaneously sell) to them.

Underwriting – With Your Gut

Capital Blueprints started offering seller-financing in 2008, according to the company’s founder and CEO Kevin Kaczmarek. The Indianapolis-based real estate investment firm has bought, rehabbed and sold 250 homes using seller financing over the past four years, he said.

He estimates that about half of the buyers of those homes have been through foreclosure. “Part of it … is you kind of get a gut feel,” he said about Capital Blueprint’s underwriting process. “We’re willing to take that chance.”

That often means overlooking subpar credit scores when evaluating borrowers, Kaczmarek said. In fact, one of Capital’s best clients was a man with a 425 credit score who borrowed and bought from the company in 2008, he said. In contrast, the average credit score of a borrower who closed a primary mortgage in October was 750, according to Ellie Mae, a mortgage software provider.

Filling a Credit Void?

The mortgages can offer borrowers potential savings in a market where rental rates are soaring. Marty Boardman, chief financial officer of Rising Sun Capital Group, said the typical home that his company sells would cost $1,100 to rent, but only $900 to own if a borrower uses the company’s seller financing.

Sanford said that seller financing “if used properly, can be a huge benefit to families.” They are filling a lending void that consumer advocates and real estate professionals have lamented for years by extending credit to people who would otherwise have no hope of purchasing property, he said.

Triple Interest Rate, Double the Default Rate

But Sanford cautioned that seller financing also sets up some vulnerable borrowers for foreclosure.

The risk partly stems from the terms of the loans. Typically, they carry an interest rate that is sometimes as high as 10 percent, about three times the current average rate of a conventional 30-year-fixed rate mortgage. They also typically require a down paymen of about 10 percent.

A 10 percent down payment is not remarkably low (Federal Housing Administration-insured mortgages only require a 3.5 percent down payment), but it is still less than half of todays’ average, which was 22 percent in October, according to Ellie Mae.

The mortgage’s most exotic — and risky — feature, however, is probably its brief length. Though a seller-financed loan is frequently structured like a 30-year loan, it often forces a borrower to pay off the outstanding balance of his mortgage in from three to seven years in a “balloon payment.”

Capital Blueprints usually requires a balloon payment after seven years, Kaczmarek said. That could be one reason why Capital Blueprints mortgages’ have a default rate of what Kaczmarek says is about 8 percent.

That’s about twice the average default rate for conventional home loans, according to Cecela, publisher of Inside Mortgage Finance.

Seller-financiers often require balloon payments so that they can cash out their investments more quickly. “They don’t want to take a long-term commitment to recoup their money,” said David Crump, director of legal research for the National Home Builders Association.

Boardman claims that the loans still give homeowners “ample time to become credit-worthy again” and obtain a conventional mortgage to pay off the seller-financed one, however. Rising Sun Capital Group offers a seller-financed mortgage that requires a balloon payment after 5 years, he said.

‘A Recipe for Disaster?’

Some critics say that using a seller-financed mortgage to transition into a long-term and more sustainable mortgage is fraught with hazards. Kathleen Day, a spokeswoman for the Center for Responsible Lending, said the balloon payment is “predatory.” If a homeowner slips on any sort of debt payment, Day noted, he or she probably won’t be able to qualify for a conventional mortgage when it comes time to make the balloon payment.

“When the balloon hits, then guess what, you violated this contract, ‘Get out.’ ” Sanford added. “You lose all your equity no matter what.”

Cecela called seller-financed loans offered by some investment firms “a recipe for disaster.” “A huge number of these loans are going to default,” he said.

Despite similarities between the notorious subprime mortgages of the housing boom and today’s seller-financed loans by investment firms, there’s an important difference: Even if they become more common, they wouldn’t pose a risk to the financial system.

That’s because seller financiers do not sell their mortgages to major lenders or government-sponsored entities whose failure could require bailouts. Seller financiers assume the full risk of the loans.

Nimble Foreclosers

But that’s acceptable to some real estate firms, in part, because they typically can complete foreclosures much more quickly than banks. The main reason why? They don’t have enormous backlogs of foreclosures like major lenders do, Sanford said. As buyers and sellers of real estate, they also can flip repossessed homes much more efficiently than banks.

And Sanford said that the firms are also able to absorb foreclosure-related losses because they may “pad their pockets a little more” in the first place, by selling their properties at above-market prices.

Why are they able to sell at above-market prices? Because they’ve cornered the market on subprime borrowers.

Dodd-Frank’s Potential Impact

Experts say that new mortgage rules that are part of Dodd-Frank Wall Street Reform and the Consumer Protection Act that may be introduced later this month could make seller financing at least marginally more difficult. One rule will require a license of any entity that originates more than three mortgages in one year, and another would ban balloon payments on loans whose interest rates exceed a market rate by 6.5 percentage points.

Capital Blueprints and Rising Sun Capital Group’s rates fall just short of that threshold, however.