CAPITAL- Capital refers to whether you have enough money for the down payment and closing costs. If it’s a purchase, and you’re putting down 10%, the underwriter will want to know where this money is coming from. For example, do you have this 10% in a bank account, a retirement account, or is it a gift from a relative? Gift money from other is certainly permitted, but there are restrictions with gift money. The underwriter will also want to know if you have enough cash for emergencies. An underwriter will generally require 2 months (sometimes more) of PITI (principal, interest, taxes, and insurance) in a bank account or retirement fund, in case you come upon financially hard times and have trouble paying the mortgage.

CAPACITY- Capacity refers to your ability to repay the debt. Based upon the income indicated on your loan application, the underwriter will calculate your debt-to-income ratio (DTI ratio). The DTI ratio is calculated by adding the minimum monthly payments of all your revolving (ie credit card) and installment (ie car loan) debt, plus your new mortgage payment (including taxes and insurance), and dividing by the monthly income indicated on your loan application. For example, if you have $200 in monthly credit card payments, $400 in monthly card payments, and your new mortgage (principal, interest, taxes, and insurance all included) will be $3000, then the total of your new monthly debts will be $3600. If your monthly income before taxes is $8000, your DTI ratio will be $3600/$8000= 45%. 50% is generally the maximum DTI a lender will allow.

CHARACTER- Whereas capacity refers to your ability to repay the debt, character refers to your past history in paying back your creditors. An underwriter will review your credit report and examine how you’re handling current debt obligations, and how you’ve handled past debt obligations. Particularly, the lender will want to know if you’ve ever been late on a mortgage payment, ever declared bankruptcy, or ever been foreclosed upon. Additionally, the lender will evaluate your tri-merged credit score. When you apply for a credit card or car loan, your credit is pulled from only one of the 3 bureaus (Equifax, Transunion, and Experian ). However, when you apply for a mortgage loan, your credit is pulled from all 3 bureaus; hence the term, tri-merged credit report. See the section “xxxxxxx” for a discussion of understanding your credit score. Your score can vary widely with each of these bureaus, and the underwriter will only use one of these scores to make an approval decision. Specifically, the underwriter will take the median of the 3 scores, ie the middle score. So if a borrower has scores of 650, 690, and 740 reporting, the lender will use 690.

COLLATERAL- The evaluation of capital, capacity, and character is specific to the borrower. However, since the borrower is pledging his/her property as collateral for the loan, the underwriter wants to know the value of that collateral. To assess this value, a professional, certified appraiser that is a neutral third party to the transaction (ie not an employee of the lender and not a close friend or relative of the borrower) will be sent to the property. The appraiser will determine the fair market value of the property, ie the price that would be agreed upon in a sale between a willing buyer and seller. If the property is a purchase, an appraiser will make sure the sales price is justified. In the event the sales price and appraised value are not the same, the lender will use the lesser of the sales price and appraised value.

There are sellers who would like to sell, but who don't have to sell. If they don't get their price, they either stay put or rent out the property until the market turns. Sellers who don't need to sell are often resistant to negotiating the price.

Motivated sellers, on the other hand, need to sell. They could be transferred by their employer and have to relocate quickly. Or, they might be facing financial hardship. Or, perhaps they have already bought another home. These sellers have a deadline to meet. They are usually open to considering all offers.

Another factor that will affect what price you decide to offer is the condition of the local real estate market. National, statewide and even regional home-sale trends may not apply to your neighborhood. For instance, in Alameda County (home to Oakland, Calif.) the median home price was down 2.2 percent between November 2006 and November 2007. However, just across the bay in San Francisco County, the median price jumped 6.9 percent during the period, according to DataQuick Information Systems.

HOUSE HUNTING TIP: Before making a decision on how much to offer initially, investigate your local housing market. Find out as much as possible about the most recent sales in your target neighborhood.

Did homes similar to one you'd like to buy sell for close to the list price? Or, did they sell for much less, or maybe even for more than the seller asked? Do you have a lot of inventory to choose from, or is the kind of house you're looking for in short supply? Your real estate agent can help you collect this information.

Look at sales information for the past six months to determine if prices are rising, steady or declining. If prices are dropping, a low initial offer price is warranted. Where prices are holding or rising, you may have less opportunity to buy at a discounted price.

Try to find out if there is flexibility in the list price. Your agent might be able to get a sense of the seller's willingness to bargain by having a discussion about price with the seller's agent. Ask your agent to present your offer in person to the sellers and their agent, if possible. This can provide your agent an opportunity to find out if there is hope for reaching a satisfactory resolution, or if further negotiation is a waste of time.

Your first offer can make a big impact on the seller. Very low offers are sometimes rejected outright. In this situation, give the sellers time to cool off. Then, raise your price some and make another offer to show your sincerity.

An ideal offer price is one that is close enough to the seller's ideal price that they won't risk losing the opportunity by countering back with a higher price. However, since many sellers counter any offer that is lower than the list price, you might want to offer less than you're willing to pay so that you can increase your price when the seller counters. That is unless you're competing with other buyers. If you are competing, your first offer may need to be your best offer.

When there is a chasm between the buyer's and seller's price, counteroffering back and forth can bring about the desired result. But, it requires patience and fortitude.

THE CLOSING: You need to stick to your price -- or close to it -- and be willing to walk away if you don't reach a meeting of the minds.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

As to the why, the answer is sediment. Sediment is small bits of dirt, rock and other debris that can work its way into your water heater over time. Being heavier than water, it will settle to the bottom of the tank and build up. It's not an earth-shattering problem, but in areas having water with a high mineral content, or water coming from a well or other supply that may not be well filtered, it certainly is possible to accumulate a fair amount of material in the bottom of the tank.

That sediment buildup can potentially decrease the amount of hot water the tank can hold, or it can clog up the drain valve. If your city periodically flushes the municipal water lines, or anything else causes a water surge or a sudden increase in water pressure, that layer of sediment can get itself all stirred up and work its way into faucets, valves and other areas where it's better off not being.

Hence the advice to periodically drain and flush your water heater to remove that buildup of sediment before it can do any harm. This is a very simple procedure, and how often you need to do it depends on your local water conditions -- annually or even semiannually in areas with poor water quality or if you're on a well, and every couple of years in areas with very clean water or homes with a filtration system.

FLUSHING YOUR WATER HEATER

First of all, shut the power. If you have an electric water heater, simply shut the circuit breaker. Don't overlook this step, because if the elements come on while they're not covered with water, it can do some serious damage. For a gas water heater, shut the valve controlling the gas supply to the heater.

Next, shut the cold water supply to the water heater. This is a valve that is located above or next to the heater. Go inside the house, open the hot water faucet that is closest to where the water heater is, and wait a moment until no more hot water comes out.

Near the bottom of the water heater is a drain valve. It may be white plastic, or it may be a brass valve that looks like an outdoor hose bib. Attach a garden hose to the valve, and route the other end to a safe location. Remember that this is very hot water that will be coming out of the hose, so keep it away from kids, pets and sensitive plants.

If your water heater is located in a basement and you have nowhere to route the hose -- to a sump or floor drain, for example -- then the draining process will need to be done with a bucket, and will obviously be a whole lot more tedious. To avoid burns, use a sturdy, good-quality bucket, and don't fill it more than half full.

Open the drain valve all the way, and let the water heater drain. This will typically be a relatively slow process. You may find it necessary to open the pressure relief valve on the tank to encourage things to get started, something akin to punching a second hole in the top of a can to get it to drain.

To get an idea of how much sediment is in the tank, you can run some of the hot water into a large glass jar (carefully). This is a good indicator of what was in the tank, and if you know how long it's been since the last time it was drained, it can give you a rough idea of how often you should be doing this.

When the tank is empty, shut the faucet in the house and turn on the cold-water supply valve. This will allow fresh cold water to run through the tank, stirring up and flushing out any remaining sediment. Unless you have a tremendous buildup of material in the tank, it shouldn't take more than about five or 10 minutes to completely flush it out.

When the water is clear, shut the drain valve and remove the hose. Leave the main cold-water supply valve open and refill the tank. When the tank is full -- and only when it's full -- you can turn on the electricity to reactivate the elements, or turn on the gas valve and relight the pilot. If you are unsure about how to safely relight the pilot, call your gas company for assistance.

Remodeling and repair questions? E-mail Paul at paul2887@ykwc.net.