So, you want to buy a San Diego home? (The second in a series of thoughts for home buyers.)

Now that you have completed step 1 and have gotten your dream home outlined on paper what comes next. Next is determining how much house you can afford or as I like to call it Reality.

There are lots of mortgage calculators available on the internet to help you run numbers. Most are very easy to fill out and you can make instant changes to any parameter, like interest rate or income, so you can explore several options. I have included a link on the right called Affordability Calculator that you can use to run your own numbers.

One of the biggest variables in amount of your monthly payments is the interest rate you are charged for the mortgage. As we all know, lenders are in the business of lending money but they are also in the business of getting it back. Because lenders are dramatically risk averse they only loan money to people who have shown they will pay the money back. They also only provide the best interest rates to people who have a track record of managing their money wisely. Lenders use lots of criteria to decide if you manage your money well, but one of the most important criteria is your credit score. If you pay your bills on time, don’t run up your credit cards to the maximum and treat credit responsibility you will probably have a good credit score. There are lots of companies that advertise they can show you your credit score. The problem with their pitch is that the credit score they provide to you is not the credit score lenders get. I suggest you save your money and work with a reputable lender who can really help you understand where you stand credit wise. If your credit scores are good or excellent, congratulations you will probably get a very favorable interest rate. If your credit history has some problems your lender can suggest ways to improve your scores. Just as it took a while to accumulate a poor credit history it takes a while to improve the credit score. Start implementing those corrective actions immediately; there is never a time like the present to begin making yourself more attractive to lenders. Fixing your credit might be a frustrating and arduous task but keep at it and you will be surprised how nice the reward of a better interest rate makes to your home buying experience.

Oh, by the way, getting yourself pre-approved for a mortgage is a great way to show a home seller that you are serious about wanting a new home. Check with the bank or credit union you currently use, they are always happy to talk to their customers about other banking opportunities and you already like them right? After all you trust them with your money now.

About catherinetalksrealestate

I am a San Diego native who loves everything about San Diego. I enjoy camping, hiking and reading. I am a licensed real estate agent in San Diego working with Coldwell Banker.
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