Don't build yourself a mortgage mountain. It's fine to want the best home you can afford, but be certain that it is comfortable affordability. Although there are loans that will stretch your qualification ratios for up to 50% (the ratio of your total mortgage payment to your total income) the traditional ratios--the mortgage payment as 28% of your income and the total of your mortgage payment plus your monthly debt payments as 36% of your income--are good basic guidelines. You may have heard the term "house poor" This means that someone may have stretched their ratios to the limit, and have little room for housing increases that may occur, not to mention the 'little extra's in life'.  There are some exceptions your financial planner may agree on, such as a 15 year mortgage with a higher payment, but builds equity much faster.  Be sure you are comfortable with the payment.

Get your budget under control. Spending some time reviewing your budget (or developing one if you don't already have it) and sharpening your money saving skills can bring big rewards later. A coordinated budget allows you to get the most home for your money without strapping yourself while eliminating wasteful spending.

Begin to gather documentation. It is not necessary that you have all items on hand before you apply, but there are a number of documents you will need eventually and the approval process will go much smoother if you begin to gather them now. Examples: /space/ W-2's and income tax returns from the last few years (especially if you are self-employed), copies of pay stubs, records of any child support or alimony (either going out or coming in) and bank statements for all accounts (checking and saving) for the last 3 months.

Don't forget about closing costs. In addition to your down payment, you will need to reserve funds for closing costs. Depending on the type of loan and your location, these costs can typically range from 2-6% of the mortgage amount, will be paid in cash at the closing and on certain loan programs cannot be borrowed funds. If you have not already entering into a purchase contact, you may have the option of offering a contract with the seller paying for a portion of closing cost.  It's best to use a buyers agent (realtor that works with buyers) to help assist you with your needs when offering a formal contract.  Be sure and speak with your mortgage consultant regarding your funds that you have (or will have) available for closing.  We can be of great assistance when it comes to helping buyers find a loan program best suited for you.

Consider a 15 or 20 year term. Many home buyers make the assumption that a shorter term will boost their payments out of reach. Unless you make the comparison, though, you may never know if a 15 or 20 year (if available) term could have been affordable. See a comparison of a sample loan (see our loan calculators). If you are concerned about committing to the higher payment on a shorter term, try this tactic: Mortgage the home with a 30 year loan, however pay the mortgage at the shorter term payment. It will do wonders for your equity position! (Keep in mind that a shorter term usually allows for a better rate).