Seven Steps You Can Take Now to Prepare for a New Home Mortgage

Figure out What You Can Afford: Use a Calculator
What you think you can afford, and what lenders think you can afford, may be two different amounts. Use a mortgage prequalification calculator available on the Internet to see how much mortgage companies think you can afford. Is is the only number that counts.

Experience the Feel of a New Mortgage Payment Schedule
Once you have determined the maximum loan amount for which you theoretically prequalify, enter this amount, plus the going interest rate and length of time you expect to make payments into an online mortgage payment calculator to come up with a monthly payment amount.

If this number is larger than your current expense for shelter, take the difference and put it in to a down payment saving account or use it to pay down debt. Continue setting aside this money each month while you are looking for a home; it will give you a real feel for how a new mortgage will affect your cash flow.

New Student Loan Payback Program Can Put You in a Better Position
If you have a student loan and a modest income, you might want to look in to a new program that caps monthly payments at 15% of income. This new program is designed to lower monthly payments of student loans to make them more manageable. Even if you qualify, however, you may prefer to make larger student loan payments now and settle for a smaller home than stretch your home budget and extend the repayment of your student loans. Your anticipated future income, family needs, and lifestyle choices will all be considerations in this decision. For more info on the student loan program, check out www.ibrinfo.org.

Complete the Mortgage Pre-approval Process
Using an online mortgage prequalification calculator does not actually get your pre-qualified for a loan, but it does give you a good idea of how much you might qualify for. To actually become pre-approved, you must submit the followup paperwork required by the potential lenders or brokers.pre-approval means that you are approved to purchase a home and get a loan of up to a specified amount. Final approval is subject to the lender validating the property value, title, and other issues. Click here tofind lenders who will prequalify you in your area.

Avoid Changes after Loan Pre-approval

Once you complete your pre-approval, avoid making any changes to your personal or financial situation. For example, avoid opening or closing credit card or bank accounts, purchasing a new vehicle, changing jobs, or changing marital status. Since you will have to sign documents attesting to your personal and financial status at the close of escrow (if your state requires escrow) or on the day of transfer of title, you do not want changes to come up at that time that could delay your closing or cause the deal to fall through.

Finding a Home: Make Friends with a Realtor

You will probably want a buyer's agent, who will look after your interests, rather than a listing agent, whose job is after all to get the highest price for the property. In addition, if you plan to try buying a short sale, REO, or foreclosure property you need the most experienced help you can get. Lenders, title officers, and inspectors as well as other home buyers can point you to the experts and steer you away from the dilettantes. Your real estate agent should communicate well with you and not waste your time showing you homes that are not a good fit--but when a great home hits the market, your agent should get you a look right away. You will only learn if an agent is right for you by working with that person for a day or two. Do not sign any papers committing you to any agency before you are absolutely comfortable that the person will deliver.

Then Start Home Shopping

If you have followed the steps above, you are comfortable with your prospective mortgage, you are pre-approved, and you have a real estate agent. With these three elements in place, once you find the right home, getting the deal done may not be stress free, but it will be much easier and will more likely result in success than if you start shopping first and then try to arrange the financing.

Home prices have declined over the last year by more than 23 percent, and as of June, 2009, there is more than nine months of new and existing home inventory on the market. There are lots of bargains to be had for those who are prepared. Happy hunting!