Basic Steps to Help Insure A Successful Financial Decision

LoanSmart offers the following basic steps to help insure a successful financial decision when buying a home.

1) As a rule of thumb, one's mortgage payment including principle, interest, taxes and insurance should not exceed 28 percent of his gross income before taxes are taken out. The total mortgage payment plus the monthly payments on credit cards and installment debt such as car and student loans should not exceed thirty six percent of his gross income.

2) Gain an understanding of the tax benefits to purchasing. The federal government encourages home ownership in the United States. In most cases, all of the mortgage interest a person pays is a tax deduction he can claim on his tax return. In addition, he can claim tax deductions on the real estate taxes that he pays. First time homebuyers, defined as people who have not purchased in the last three years and own no other single family homes, can receive a tax credit up to $7,500 or ten percent of the purchase price. To learn more about the tax benefits of home ownership, it is recommended to consult with a professional licensed tax advisor or CPA.

3) Meet with a mortgage professional to get prequalified and preapproved. During the process, the mortgage professional can work with the client on his budget. The lender can go over the client's credit report with him and provide information on loan programs and interest rates. Then the client can get formal approval from the mortgage professional.

4) Select a real estate agent in the area. The agent has access to all of the local inventory including foreclosures, short sales and regular inventory. The client can meet with her and let her know what he wants and she will educate him on what is available. In many cases, the client will have to adjust his expectations between his dream house and his budget.

LoanSmart performs complimentary homebuyer readiness reviews. For more information, call Joe Engle at (805) 490-0009 or visit www.loansmartinc.com.