SANTA CRUZ (May 8, 2010) - Buying a home takes advance planning. Here are some helpful tips for anyone who is considering buying a home within the next six to twelve months.

1) Don’t buy a car or make any other large purchase (furniture, etc.) between now and the time you close escrow on your new home. Keep your monthly obligations to a minimum because monthly payments will reduce your purchasing power. Save and preserve as much cash as possible. TIP: a $400 monthly installment obligation will reduce the loan that you will qualify for by $75,000!

2) Select a lender based on recommendations from your friends, relatives, work associates or real estate agent. You may want to interview two or more mortgage professionals before making your selection.

3) Review your credit report. Obtain a comprehensive credit report from your mortgage professional and check it for accuracy. He or she may recommend that you pay down some of your outstanding balances. This may cause your credit scores to go up plus, the lower monthly obligations will increase your purchasing power. TIP: A credit report that you can get for free on-line will not be as comprehensive as the one your lender will need to get your loan approved.

4) Get your loan approved before you start shopping for a home. A loan is said to be pre-approved when an underwriter reviews a prospective homebuyer’s tax returns, bank statements and credit report and confirms a sales price and loan amount that the homebuyer will be able to obtain. Final approval will be issued once the property has been appraised and the title report and purchase contract have been reviewed.

5) Ask your family for help. The mortgage industry allows a homebuyer to receive some or all of the down payment as a gift from a relative. Many first time homebuyers receive money from their families to help them afford the down payment and closing costs. Tip: For those parents who think there is an obligation to pay a tax if they donate more than $13,000 per year per child, I suggest checking with your accountant for the whole story.

6) Select a real estate agent the same way you would select a mortgage professional: by a referral from a friend, work associate or your mortgage professional. You may want to interview two or more agents before making a decision.

7) Ask the seller for help. To help a buyer come up with the cash necessary to cover the closing costs, sellers are often willing to contribute. Just ask. TIP: to get a seller to help with the closing costs, the prospective homebuyer must be fair and not hammer the seller on the sales price.

Now you know what you can do to help yourself become a homeowner.

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