Mortgage do's and don'ts.

Here's the good news: More people than ever can buy a
home.

Now for the bad: It's going to take some patience, restraint
and some careful planning to get there. And if you've only
managed to put away $1,000 in savings by then, it'll be time
to forget about the $300,000 beach house.

To pull the purchase off, try heeding some of the guidelines
below that our experts suggest. It may not always be fun, but
doing so will help get you where you want to go.

Pay your bills and start saving.

No. 1, pay your bills on time. There is no single element that
can so dramatically impact the success of an application as
your credit history. Another thing, of course, is savings.
People should have a good disciplined savings pattern.

That's the kind of behavior that's going to make them a
successful homeowner.

Everybody comes into the real estate market with a different
perspective and level of experience. The fact that online
mortgage applications, new loan products and rising interest
rates are competing for attention these days makes it all the
more difficult to give foolproof advice. But some general rules
apply to pretty much anybody when it comes to getting the
money to buy a home. So here are some of the do's and
don'ts that buyers will want to consider.

Five do's...

1. Make loan and other debt payments on time, especially
over the months leading up to the filing of your mortgage
application. It sounds simple, but every 30-, 60- or 90-day
delinquency on a loan or credit card is going to reduce the
credit score the lender ends up considering as part of the
loan file. That score, in turn, will determine how good a loan
you get -- if you get one at all.

2. If something has to be missed, miss the credit card
payment first, followed by the payment on any installment
loan you might have and finally, the payment for an existing
mortgage. That's because credit scoring systems look at the
performance of similar loans first when deciding what type of
score to assign. It will give the most weight to the
performance of another mortgage, for example, then the
performance of something like an auto loan, which features
fixed payments and a fixed rate the way many mortgages do.
Lastly, it would evaluate the payment performance of so-
called "revolving" loans, like credit cards, which feature
variable payments that fluctuate with the outstanding
balance.

If you had to prioritize -- and we would hope you wouldn't be
in that situation -- pay your mortgage loans, pay your
installment loans, pay your revolving loans.

3. Consider paying off more debt and putting down a smaller
amount at closing. The move leaves borrowers with larger
mortgages, but it will allow them to replace non tax-
deductible, high-interest rate debt with lower-rate mortgage
debt that features deductible interest.

We see this trend in the marketplace, whether it's a refinance
transaction or a purchase transaction. Borrowers are putting
less equity in their homes, borrowing more against their
homes, and they're paying off consumer debt... at least for a
while.

4. Get the mortgage first if multiple financial obligations are
going to pop up in the near future. Numerous credit inquiries,
such as new applications for credit cards, can hurt a
borrower's credit score, especially if they're filed in the
months prior to the home loan review process.

5. Increase the size of the down payment you're able to make
by saving as much as possible, as often as possible. Don't
put the savings into something volatile, such as an individual
stock. But evaluate money market or other accounts that offer
reasonable rates of return, automatic payroll deductions or
other financial incentives to save.

It depends on how much you have saved already, but it's
important to take a portion of each month's income, and set it
aside for the down payment and/or closing costs.

While these are all good steps to follow, borrowers have to
think of what they shouldn't do as well. Resisting the
temptation to splurge or slip-up in the credit arena are at the
top of the list.

Five don'ts...

1. First off, don't make any big purchases over the next
couple of months. Besides the obvious fact that it makes
less money available for the down payment, it might require
you to get yet another loan. A significant debt such as a
$15,000 auto loan will look bad to the mortgage lender's
credit scoring systems. Plus, the human underwriter won't
want to see you adding a couple of hundred dollars per
month to your monthly expenses.

Generally, as a rule of thumb, you want your total debt
obligation to be no more than 50 percent of your gross
monthly income. You certainly don't want to load up on
consumer debt if you're anticipating purchasing a home and
you're unsure of what your mortgage payment is going to be
and if you think you're within the range of exceeding that 50
percent requirement."

2. Don't try shooting for that six-bedroom house in the
Hamptons if it's going to be too much of a stretch in your
current budget. Lenders consider what's known in the
industry as "payment shock" when approving loans.
Somebody who goes from a relatively small monthly housing
payment to a huge one either won't qualify for a mortgage or
will end up having to cover too much loan with too little
money.

If you've paid all your bills on time, but you've been paying
$450 in rent with a roommate and now you're going to have a
$1,650 principal and interest and insurance payment on a
house, how would you handle your monthly payment?...

You have to make sure you're comfortable about that kind of
a debt load.

3. Don't just get pre-qualified for a mortgage, get pre-
approved. To get pre-qualified, a borrower need only submit
credit, income and debt information voluntarily to a mortgage
broker or lender. That means the resulting estimate of the
maximum mortgage and home that's affordable is exactly
that -- an estimate. Before they can get pre-approved,
however, home buyers must allow their lenders to pull credit
reports, check debt-to-income ratios and perform other
underwriting steps. That puts a borrower much closer to
obtaining a loan and locking in a rate and term.

4. Don't forget what kind of money personality you have when
getting a mortgage. By taking out a 30-year fixed rate loan
rather than a 15-year mortgage and investing the money
saved on monthly payments, you might earn a higher return
on your money in the long run. But that approach won't work
for people who spend any extra cash laying around on dinner
and a movie twice a week. They can force themselves into
saving and accumulating equity faster by going with the
shorter term and higher payment.

5. Last but not least, don't forget that homeownership brings
with it many burdens. The cost of defaulting on a loan is
much greater than the penalty of missing a rent payment.
Too many black marks on the financial history and it will be
23 percent interest credit card mailers that show up in the
mailbox rather than the 9.9 percent ones your neighbor gets.