Consumer expectations for U.S. home prices perked up in December, matching a modest fourth-quarter improvement in the U.S. economy, according to a monthly survey from mortgage market firm Fannie Mae.

For its December reading, Fannie Mae said survey respondents now expect home prices to rise by 0.8% over the next year, up from the 0.2% gain predicted in November.

Views on the direction of the U.S. economy also improved: 22% of respondents indicated a belief that the U.S. economy is on the right track, marking a 6-percentage-point jump from November’s survey.

On personal finances, 40% of respondents said they anticipate their personal financial situation to strengthen over the next year. Fannie Mae noted the response marks the first time since February that a larger share of respondents indicated they expect improved personal finances rather than finances that will remain the same over the next year.

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Buying a home is both exciting and scary, especially when it's your first time! It’s crucial that you have a good mortgage lender on your team in order to ensure a smooth transaction.

You spend hours each night scanning the Internet and reading the real estate section of the newspaper looking for the perfect home. However, many home buyers do not give enough attention to finding the right mortgage company and often spend more for their mortgage than needed, because they don't know what questions to ask their lenders. Here are the MUST DO questions to ask a mortgage lender:

EXPERIENCE AND REFERENCES – How Long Has The Lender Been In The Business?

Ask lenders about their experience in the industry and their experience helping home buyers in your similar situation. Fully disclose your goals to loan officers and ask them how they would best handle your situation. Write down each loan officer's answers to reference when you make a decision who to apply with.

Ask your real estate broker or agent for references of mortgage brokers that have performed well for their previous clients. And don’t be afraid to ask the mortgage lender to provide you a list of references of home owners that they have helped in the recent past!

LOAN PROGRAM OPTIONS – What Types Of Loans Do You Qualify For?

Different mortgage lenders provide different mortgage products. And each homeowner may qualify for different types of loan programs depending on their credit, income, down payment, and many other factors.

Ask each lender to provide at least two different mortgage programs for your needs. Ask questions about each loan program until you fully understand how each loan works. If you don't understand something about the mortgage program, continue to ask questions until you do.

What about Mortgage Insurance? Some mortgages, particularly those with low down payments, will require you to purchase mortgage insurance. Mortgage insurance appears as an addition to each monthly bill until you've paid off a certain amount of the house, usually around 20 percent of its value.

COST OF THE LOAN – Can The Lender Provide An Estimate?

Every mortgage transaction includes a series of fees. These vary from lender to lender and can potentially add up to thousands of dollars that you're responsible for paying up front. Ask your lender to provide a list of the fees associated with the mortgage, along with an estimated cost for each fee. Get an explanation for any fees that you don't understand so you know where your money is going and how much to set aside.

Inform each lender that you intend to shop your loans with several other lenders. Ask them to lower the fees paid to their company. Lenders often negotiate origination and discount fees when facing competition.

INTEREST RATES - What Rates Do You Qualify For?

Mortgage lenders offer different interest rates to borrowers based on rates elsewhere in the economy, the level of demand for mortgage loans and the borrowers' credit. If you have good credit, you may be able to take advantage of special low interest rates, which can add up to considerable savings over the life of the loan.

Ask the loan officer for a lower interest rate. Interest rates are also negotiable, just like origination and discount points. Request a GOOD FAITH ESTIMATE (GFE) - This puts the offer in writing and binds loan officers legally to the interest rate and most of the fees.

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Have you heard the news?! Interest rates are at an all time low! Following the Fed's announcement last week, the national average rate on a traditional 30 year fixed rate mortgage has inched even lower to record numbers.

Rates are estimated in the mid 3% range for 15-year loans and low 4% range for 30-year loans. A successful refinance will bring qualified homeowners immediate savings in the form of reduced monthly mortgage payments, but more importantly, larger savings over the remaining term of their loan.

On another note, Uncle Sam is about to take a first tentative step out of the mortgage business by lowering the size of home loans that the federal government will guarantee, and it's already hitting California neighborhoods with higher costs and bigger down payments.

Current conforming loan limits are scheduled to expire Friday, Sept. 30.  The maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum. 

The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.  Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

Most of the nation's biggest mortgage lenders have already stopped making loans at the old limits, concerned that they will not be able to get them off their books before the official Saturday October 1st deadline.

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COASTAL SAN DIEGO PROPERTIES

The number of San Diegans filing for foreclosure and defaulting on their mortgages continued to fall in June marking the 19th consecutive month of decreases, reported real estate tracker DataQuick.

The county recorded 1,353 notices of default in June, which is down 21.8% from a year ago. A notice of default is the first step in the foreclosure process. June's drop marks the 19th consecutive year-over-year decrease for San Diego.

June numbers for San Diego align with the state's. Foreclosures in California fell to a four-year low during the second quarter, from March to June, the monthly DataQuick report said.

"A lot of theories are being floated as to why the numbers are down," said DataQuick President John Walsh, in a statement. "Bank policy changes. Legal challenges. Politics. Holding back temporarily so as not to flood the market."

Walsh added: "The fact of the matter is that no one really knows, outside of lending and servicing industry insiders. One thing is certain: Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us,"

Comparing 2011's second quarter to last year's second quarter, both notices of default and foreclosures are down. That's a trend seen throughout Southern California.Southern California recorded 30,384 notices of defaults this second quarter, down 19.5 percent from 2010's second quarter. There were 21,247 foreclosures in the region this quarter, down 13.9 percent from last year's second quarter.

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