posted on January 25th 2017 in LA/OC CFP Team Posts & San Diego CFP Team Posts with 0 Comments /

Are you tired of renting? Are you tired of paying someone else’s mortgage payment so they can benefit from powerful financial advantages like the mortgage interest deduction and real estate appreciation? If you are ready to change that, here are four steps.

Step 1: Find out where you stand. Meet or talk with an experienced San Diego mortgage agent and be prepared to bare your soul. He or she will need to know your whole financial picture.  Your financial planner can help by providing an up to date summary of your accounts and net worth. You may not need to come up with much of a down payment if you qualify for a first-time buyers program or a VA loan, or, for a variety of reasons, you may need to save up a certain amount to be able to make homeownership happen.  

If you are verified by the mortgage agent to be “pre-qualified” for the type of home you want, then you are ready to buy. A letter saying that you are pre-qualified is a great thing to provide with any offer you make because the seller should value the fact that you are less likely to hit a financing snag during the process. However, if you need to come in with more money down and/or money to fix up or furnish the place, the next steps might help you get there.  

Step 2: Live small. This is a step that you invariably will figure out; how soon is just a question of how determined you are to become a homeowner. There are many ways to reduce your costs to save up to buy a house in San Diego. One idea is to rent a small apartment that allows you to save a major portion of your income in an account earmarked for your downpayment. The apartment should be in an area just safe enough for you and your family and it should have just enough rooms to be functional while you save. While we are on the subject of saving, what car are you driving? This is not the time to drive a car with a high monthly payment. Lenders calculate your debt ratios right off your credit report and more monthly debt means less house.  How much equity do you have in your car? If your car’s worth a decent amount, and you can sell it and drive something much cheaper, how much sooner does that get you in your house? You should have a nice ride soon enough because you will be in the habit of saving if you follow the next step.  

Step 3: Save automatically. Set up your savings method in a way that allows money to go into an account for the house using electronic transfers. There are a lot of ways to do this, but the best one is to have a monthly amount automatically transferred that is the same amount every month and done at the same time, without missing any months. Lenders don’t like bankruptcies, foreclosures and short sales, of course, but besides those, the number one thing is to never miss a mortgage payment. A common concern for them is that you are going from a low rent payment to a higher mortgage payment, so it helps to be ready to show them your history of steady contributions. You want to be able to say, “we’ve been preparing for the mortgage payment by saving this amount every month in addition to our rent payment and here’s a printout from our bank account that shows the money going in every month.”

Step 4: Watch your credit like a hawk. Better credit = lower interest rate. Lower interest rate = either lower payments or more house. Make it your job to make sure nothing pops up on your credit score as you prepare to buy. The more recent a ding on your credit, the more damaging it is. Also, use the time it’s taking you to save up to dispute any “dings” on your credit you disagree with. To do this, simply write each of the three main credit reporting agencies and explain why the ding should not be there. They are required to verify with the creditor and will let you know if the creditor insists it should be there. Dispute it again if you feel you are right, and maybe a third time. All they have to do is fail to respond and it should come off.
For more help with making your dream of buying a home in San Diego a reality, consider hiring a San Diego financial planner who carries the Certified Financial Planner™ designation because of their training on seeing the big picture and problem-solving. If you have questions, don’t hesitate to reach out anytime by calling (800) 620-4232.

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