For most people, buying a home represents the largest and most significant investment they will ever make. So it only makes sense to prepare for that process.

Here are seven things you can do to prepare for the home buying process, before you even begin shopping for a home.

1. Learn the home buying steps in advance.
When you understand the basic steps to buying a home, you will make better decisions along the way. This will help ensure a smoother real estate transaction. Mortgage and home buying lingo is a big part of this, so be sure to read through a few real estate glossaries before you get deep into the home buying process. The last thing you want is to sign a document that uses terminology you don’t understand!

2. Review your debt-to-income ratio.
This ratio represents your amount of monthly payments (bills) compared to your average monthly income. Debt-to-income ratio is one of the things mortgage lenders will look at when qualifying you for a loan. Most lenders will prefer your debt not to exceed 20% of your net monthly income. If your debt is more than 20% of your income, it’s time to pay down some of those bills. You’ll have a much easier time qualifying for a loan if you do.

3. Set your home buying budget.
By using a mortgage calculator, you can get a pretty good idea of how much mortgage you can afford to pay each month. This directly corresponds to the amount of home you can afford to buy. Once you have an approximate budget in mind, you’ll be able to limit your home search to those homes that fall within your budget range. This will save you a lot of time and hassle, while keeping your home search financially feasible.

4. Start saving your cash.
Unless you’ve just won the lottery, there’s a very good chance you’ll need some cash reserves during the home buying process. For one thing, mortgage lenders like to see that you’ve got some money saved for your settlement / closing costs. Secondly, the additional cash will come in handy for moving expenses, furniture purchases, home insurance, and all the other compiling costs that go along with buying a home.

5. Review your credit report.
Order a copy of your credit report and look it over for errors, inaccuracies, or anything that just seems odd. This is one of the first things a mortgage lender will do when considering you for a loan, so it makes sense to conduct your own review first. The easiest way to obtain copies of all three reports at once (from Experian, TransUnion and Equifax) is to visit www.AnnualCreditReport.com.

6. Fix credit errors quickly.
If you review your credit report and find something that doesn’t seem right, go to the company’s website who produced the report (TransUnion, Equifax or Experian) to submit a correction request. These companies are required by law to examine any reported errors on credit reports, and to correct them if necessary. But the process can take time, so you want to stay on top of it to resolve it quickly.

7. Get pre-approved for a loan.
During pre-approval, a mortgage lender will review your credit report, income and overall debt to determine how much of a loan you qualify for. With a “pre-qual” letter in hand, you can be more confident about your buying power in the real estate market. It also shows sellers that you’re serious about (and capable of) buying a home. This can be an important factor if the seller receives offers from multiple buyers, as they will likely consider those who have been pre-qualified above those who have not.

* You may republish this article online if you retain the author’s note below with the active hyperlinks intact.

About the Author
Brandon Cornett writes for Foust Asset Development, a team of real estate professionals in Orange County, California. Learn more by visiting http://www.foustonline.com

But when your credit score is low, you will probably pay a higher interest rate on the loan, which translates to a bigger mortgage payment. Yikes!

A new article was just posted over on Home Buying Institute that teaches you how to improve a bad credit score prior to buying real estate. It offers step-by-step instructions on obtaining your credit score, comparing it to the national “scale,” and improving your credit score if it happens to be low.

Read the article:
Avoiding the Bad Credit Blues

More home buying tips

A lot of San Diego home buyers find themselves house poor because they bite off more than they can chew — in a mortgage sense. If you overestimate your ability to pay a certain amount each month on a mortgage, you will undercut your ability to spend money on other quality-of-life items.

Nobody wants that. So be sure you’re not over-investing in San Diego real estate.

What Can You Afford?
Before you begin your San Diego house-hunting process, find out how much of a mortgage loan you can  afford to take on. You should be able to “comfortably” pay your mortgage each month, while still having money left over for living expenses, savings, and quality-of-life niceties.

To determine your financial comfort-zone, you need three things: a budget, a price on a San Diego home, and an online mortgage calculator. If you don’t have an actual sale price of a home, just start with the cost of a house you would be interested in buying … something you think is within your budget.

Now enter the home price into the mortgage calculator using current interest rates and a 30-year  mortgage (for hypothetical purposes). Once you’ve obtained an approximate monthly payment for various mortgage sizes, you can more accurately figure the price ranges into your budget.

Remember, if you over-invest in San Diego real estate, you will face to undercut other expenditures. You will have to scale back on your car payment, spend less on groceries, or avoid the fun stuff in life like movies and dining. In other words, if you spend too much on your San Diego home, you may find yourself house poor.

So, yes, you can buy a San Diego home even if you have bad credit. You can even buy a home after a bankruptcy.

It wasn’t always this way. In the past, it was a lot more difficult to buy a home in San Diego if you had bad credit. Lenders just weren’t as willing to undergo what they saw as a financial risk. So what has changed? Well, for one thing, the mortgage industry is a lot more competitive today than it once was — hyper-competitive you might say.

On top of that, the Internet has opened up many mortgage lenders to a much wider audience, while also reducing operating costs. So a lot of San Diego mortgage lenders are willing to extend their line of mortgage products to match this new, wider audience.

Of course, you will face additional hurdles when buying San Diego real estate with bad credit. For instance, your qualification process won’t be as easy as it would for a person with sterling credit. You will also likely pay a higher interest rate on the loan. But it’s certainly possible to buy a home with bad credit, in San Diego or anywhere else for that matter.

To learn more on this subject, visit the bad credit mortgage section of Home Buying Institute.

Here are some more resources to help you out:

• Bounce Back Fast After Bankruptcy (MSN)
• Buying a Home After Bankruptcy (Quicken Loans)
• Buying a House With Bad Credit (ThinkGlink.com)