Summary: This article offers step-by-step advice on buying a home in San Diego, California.

The home buying process is different for different buyers. Joe might have better credit for Jane, for example, and thus his mortgage qualification process will be easier. Or maybe Jane is using a San Diego real estate agent but Joe is not. Once again, they will face different hurdles along the way.

With that being said, there are certain steps to the San Diego home buying process that apply to most buyers, most of the time. Here are six steps to buying a San Diego home that, if followed, will help ensure a smoother home buying process.

1. Review Your Credit

Credit makes the financial world go around, and this is especially true when buying a home in San Diego. Mortgage lenders will review your credit report and credit score (yes, they are two separate things) to determine the amount they are comfortable lending you. So it’s wise to review your credit first, long before you complete your first mortgage application.

You can get your credit report from all three reporting agencies at once by visiting AnnualCreditReport.com. The next step is to review your credit report for errors. If you find any errors on your credit report, try to get them corrected as soon as possible. Experian, Equifax and TransUnion — the credit reporting agencies — are required by law to correct any errors on the credit reports they produce.

You should also get a copy of your credit score from a website like MyFICO.com. Compare your credit score to the national average, which is around 690. You can compare your credit score to national and state averages at NationalScoreIndex.com. Is your score lower or higher than average? If it’s significantly lower than the national or state average, you should make a serious effort to improve it by paying down your debt, paying bills on time, etc.

Having a good credit score will make your San Diego home buying process much smoother, namely by helping you qualify for a San Diego mortgage loan.

Related article: Free Copy of Your Credit Report

2. Determine Your Home-Buying Budget

When buying a home in San Diego, you will first need to determine a realistic budget for yourself. This budget will help you determine the general price range you can afford to pay on a new home in San Diego.

Start by reviewing your current income and debt. How much money remains each month after you’ve paid all of your bills? Part of this “remainder” is what you’ll put toward your mortgage loan, so it should give you a basic idea of how much mortgage you can afford — allowing money, of course, for things like savings, emergencies, recreation, etc.

You can also use an online mortgage calculator to divide the sale price of a San Diego home into monthly mortgage payments. This will also help you set your price range, based on your budget and your ability to pay the mortgage each month.

3. Start Saving Your Cash

When qualifying you for a loan, most San Diego mortgage lenders will check to see how much money you have in the bank. They do this because they know you’ll have to cover certain fees and costs during the closing process (in addition to unforeseen expenses). The more money you can put away prior to applying for a mortgage loan, the more likely you will be to qualify for the loan.

4. Learn the Process and Lingo

When buying a San Diego home, it helps to understand the process you will go through and the terminology you will encounter. This is what I call the home buying lingo. The more you can increase your knowledge on the process and terminology of buying a home, the better off you will be.

This article offers a general overview of the home buying process, but you can certainly benefit from further research on each of these topics. You should also read through a glossary of home buying and mortgage terms. That way, when you run into phrases like FICO, ARM, escrow and title insurance, you’ll know exactly what is being discussed and how it affects you.

5. Make a “Need vs. Want” List

Once you reach the house-hunting phase of the home-buying process, you will want to know if each San Diego home offers the features that are most important to you. But in order to evluate homes in this way, you will need to know what those desired features are. Take out a piece of paper and divide it with a line, lengthwise. Label the left side with “Want” and the right side with “Need.”

Now list the features you need from a San Diego home, as opposed to the features that would simpley be nice to have. Photocopy the list so you have at least a dozen, and use it as a checklist when visiting a San Diego home for sale. Be sure to write the home’s address at the top so you can refer back to it later.

6. Find a San Diego Real Estate Agent

For most people, buying a home is the most significant financial move they will ever make. So it only makes sense to have a professional help you with the process — especially if (A) you’re a first-time home buyer, (B) you are new to the San Diego area, or (C) both.

A competent San Diego real estate agent can help you with many aspects of the home-buying process. He or she can help you find a San Diego home that suits you, validate the home’s asking price, make an offer on the home, negotiating with the sellers, and many other home-buying tasks. You’ll have a lot on your plate when buying a new home, so it helps to have someone in your corner to help carry the load. This is where your San Diego agent brings the value.

Subprime mortgage loans have been a fast-growing part of the mortgage industry in recent years. But lately, subprime lenders all across the country (and including San Diego) have come under fire for their tactics — specifically, some of these lenders are being criticized for how their tactics relate to rising home foreclosures.

But what is a subprime loan? How do they relate to the current rise in San Diego home foreclosures? And how can you protect yourself if you need to pursue a subprime mortgage loan?

What is a Subprime Mortgage Loan?

A subprime loan is a mortgage loan made to a borrower who would not normally qualify for a mortgage (perhaps because of poor credit or other financial issues). Subprime mortgage lenders usually charge borrowers a higher interest rate for potential losses the lender might incur should the borrower default on the mortgage loan).

Current Criticism of Subprime Mortgages

From 2000 to 2006, the number of San Diego home foreclosures continued to rise, just as it did across the nation. Recent data analysis suggests a link between the subprime lending market and this increase in foreclosures. As you might imagine, it wasn’t long before the federal government stepped in to review lending practices.

In response to this increased scrutiny, banking regulators have made their mortgage lending standards more rigid. According to Randall Kroszner, current Federal Reserve Board Governor: “This guidance … underscores that the Federal Reserve and other banking regulators expect lenders to make sure subprime borrowers not only can afford their monthly payments while the introductory rate is in effect but also after the interest rate resets.”

When Mr. Kroszner mentions “interest rate resets,” he is referring to  adjustable rate mortgages, or ARM loans. With an ARM, the interest rate  resets (or adjusts) after an initial period of lower interest. The adjustable rate mortgage is another piece of the puzzle connecting subprime lending and foreclosures.

Be Smart About Subprime Mortgages

It’s impossible to say across the board that subprime mortgages are good or bad. They can be either good or bad, depending on the circumstances. But one thing is for certain. There is certainly a link between subprime lending, adjustable rate mortgages, and the number of home foreclosures in San Diego and elsewhere in this country. So if you find yourself in a subprime borrowing situation, you should understand how these things are related, seek input from an unbiased financial advisor, and plan accordingly.

Related Article: How to Avoid Foreclosure (HUD)

But for most of us “regular folks” buying a home means applying for a mortgage loan. So to make your San Diego real estate experience a smooth one, you should understand the common problems people have when applying for mortgage loans. By understanding these common issues, you will be better able to avoid them during your own real estate / mortgage process.

A new article at Home Buying Institue outlines three of the most common mortgage problems, and offers some solutions for each problem. Apply the lessons in this article to your San Diego home-buying process.

Read the article:
Common Mortgage Problems – How to Avoid Them