Do you want to buy a home in Los Gatos, Saratoga, or the San Jose area? In Silicon Valley, it is important to talk to a lender before shopping for real estate. Sellers in Santa Clara County are saavy and expect that when you submit an offer, the loan should not be much of an issue.

Pre-qualifying for a loan makes you a little more appealing as a buyer in the eyes of the seller. Pre-qualifying means that you speak with a lender and verbally give your information on income, debts, assets, etc.

Pre-approval is a step beyond a simple pre-qual, it approves you for up to a certain mortgage amount, even before you look at your first home. It involves more work on your part (filling out paperwork, submitting documentation) but it tells sellers that you are really serious, and once approved, ready to roll. (With a pre-approval, all that's needed is a valid purchase contract, an appraisal and a preliminary title report for the lender.) Once you do start looking at Santa Clara County properties, you won't waste time looking at those you won't be qualified for-and you'll be in a strong position to make an offer as soon as you find something you like. Because buying a home is about both price and terms, one of the best ways to save money on the price is to offer great terms - such as a pre-approval.

Selecting the best financing package available is as important as finding a home that meets your needs.

There are three factors to consider in determining how much you can afford:

1. Down payment
   Most loans require a down payment between 10 and 20 percent of the home price. If you are able to make a down payment of 25 percent or more, you may qualify for special mortgage programs offered by a variety of lenders.
    
   
2. Ability to qualify for a mortgage
   Most lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, should not exceed 28 percent of your gross monthly income. They also expect your total installment debt (regular scheduled payments of 6 months or longer debt-car loans, credit card balances, etc.), including the proposed monthly mortgage payment on your new loan, not to exceed 36 percent of your gross monthly income.

   In addition to your gross monthly income, lenders review your employment history, stability, and potential for increasing your income. They also evaluate any additional income, such as bonuses, commissions and child support.

   They will request a credit report to verify your debt repayment, outstanding debt, and available credit. They will calculate your assets, including checking and savings account balances, CDs, stocks and bonds.

   Avoiding any late payments on credit accounts, and limiting your credit purchases, helps keep your credit report in good standing. If you have items on your credit report that could negatively influence your ability to secure a mortgage, be prepared to explain each situation in writing. You should also consider delaying major purchases until after you've moved into your new home.
    
   

3. Closing costs
   Closing costs typically range between 1 and 3 percent of your loan amount. These fees are due in cash at the time of closing, or, in some cases, can be included in the loan.