SANTA CRUZ (January 13, 2008) - Homebuyers and sellers as well as home owners face this New Year with many unknowns. Mortgage lenders have pared down their offerings and tightened their standards. Some lenders have declared California  a ‘declining market’ and are not willing to allow loans greater than 90 percent of the value of a property. To top it off, values are being established by very conservative standards and appraisals are being challenged.

The good news is that home prices in most of Santa Cruz County have not fallen much, if at all, and that mortgage rates have fallen over the past year. Homebuyers are not only enjoying the great rates but also find themselves in the driver’s seat (which is a welcome relief) when it comes to price and concession negotiation.

The median home price (the value that separates an equal number of home sales above that price with the same number of sales below that price) in Santa Cruz County hit a new high in calendar year 2007 of $757,600. Compare that to the previous high of $754,000 in 2005. However, we have certainly experienced a significant drop in the number of homes sold. In 2007, according to the Santa Cruz Association of Realtors, only 1472 single family homes sold. Compare that to 1905 in 2006 and the all time high of 2801 in 2004. Let’s keep in mind that our business is cyclical and will be making a turnaround; we just don’t know when.

Homebuying is a process that starts with self education or, if you are not into self directed research, a visit to a mortgage professional will provide you with the foundation that you will need to be able to make informed decisions about becoming a home owner. Here are some tips that will improve your chances of success in your quest to become a home owner.

Select a mortgage professional and get approved for a mortgage. Ask your friends and work associates for a referral to a competent and trustworthy mortgage professional. Those of us in the business of originating mortgages call ourselves mortgage consultants, mortgage planners, loan officers, lenders, etc. The approval process will entail a detailed discussion of your employment, income, debts and assets. Expect to provide income and asset documentation.

Review your credit report for accuracy. While anybody can obtain their own credit report, it is of little use unless you have a knowledgeable person explain the terms, symbols and ramifications of the print out. Your lender will obtain a credit report and interpret it for you.

Save money, don’t make any large purchases and don’t quit your job. It never ceases to amaze me how often a person that has been newly approved for a mortgage goes out and buys a car or furniture or even quits his job before completing the purchase of the home. This increased debt or newly acquired unemployment status can and most likely will cause your newly approved loan to be denied.

Ask your family for help. Many first time home buyers obtain help from family members by way of gift funds. Lenders allow gifts from family members but may not allow borrowers to accept gifts from friends because money received from friends imply pay back responsibilities. Co-signing is not the benefit it once was.

Ask the seller for help. Today, sellers are more likely to be willing to help the buyer afford their home than ever in the past 10 years. Besides lowering the sales price, the best and only way the seller can ‘give’ the buyer money is by paying the buyer’s closing costs. This can ‘save’ the buyer $10,000 or more in cash-out-of pocket closing costs or, if applied to a permanent interest rate buydown, can save the borrower tens of thousands of dollars in interest over the life of a 30 year loan. Ask your mortgage professional about your options and then ask your Realtor to negotiate this key point for you.

This column is written every Sunday by Peter Boutell, Certified Mortgage Planner and a principal at Santa Cruz Home Finance. You may reach him at (831) 425-1250 or email him at Peter@SantaCruzHomeFinance.com.