OCEAN PACIFIC MORTGAGE

Before You Begin | Choose the Right Loan for You
Picking Rates, Points and APR |Getting Pre-Approved
| Closing Your Loan | From Contract to Closing

Step 1: Before You Begin

Before you begin the home buying process, there are several steps you need to take.

One: Figure Out What You Can Afford
Determine how much you can afford - and what your monthly payments will be.

The traditional debt-to-income ratios are 28 and 36 percent. This means
that your total monthly housing payment - including mortgage principal and interest,
insurance, real estate taxes and any condo monthly assessments - should not exceed
28 percent of your before-tax monthly income. Then, when adding in all
other consumer debt payments, the total figure typically shouldn't exceed 36 percent
of your monthly income. However, each person's financial situation varies, so let's discuss
what's right for you.

Two: Reduce Your Debt
The fewer credit cards you carry - and the lower the balances -
the better. That's especially true if you have other debts such as a
car or student loan. However, don't pay down or pay off balances with
cash intended for a down payment. Even if you choose a low-down
payment option, you're going to need cash available to pay the down
payment and closing costs.

The easiest way to improve your debt picture is to close all dormant
credit card accounts. Contact card issuers and ask for instructions on closing the
accounts (for instance, you may be asked to cut up your card and
return it by mail). Instruct the card issuer in writing to enter into
your credit report, "Closed at request of cardholder." That way, there won't be
any reason to suspect that a credit problem caused the account to be closed.

Three: Solidify Your Savings
If you're like most people planning on buying a home, you need to
reduce your spending to save up for a down payment and closing costs.
It's never too early to review your spending, cut out excess spending and set a budget.

Four: Review Your Credit
It's important to understand if there are problems or errors that could
affect your ability to qualify for a loan. To do this, you'll
want to get a copy of your credit report. Because these reports
contain your credit history, it's important that you're aware of what they
contain - and whether the information is accurate. You might have excellent credit,
but odds are 1-in-4 that you'll find an error in your
report. Look for mistakes, such as accounts that are not yours. When
you find errors, contact the creditors by phone or mail to correct
the error. Then get another copy of the report 30 to 60
days later to make sure the corrections have been made.