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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Buying real estate continues to be cheaper than renting in San Diego as well as the vast majority of major U.S. cities, according to a quarterly rent vs. buy index from real estate search and marketing site Trulia.

According to the index, the cost of buying was less than renting in 37 of the 50 cities (74 percent) as of July 1, 2011. About the same share, 78 percent, favored buying over renting in Trulia's last index report.

Trulia defines total costs of homeownership to include "mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase and ongoing (homeowners association) dues and private mortgage insurance, where applicable. It also includes an offset for the tax advantages of homeownership, including mortgage interest, property tax and closing cost deductions."

"Many aspiring homeowners are on the fence about renting and buying in today's market. Should they take advantage of falling home prices and low borrowing costs, or should they continue to rent until the economy stabilizes?" said Ken Shuman, spokesman for Trulia, in a statement.

Take a look at Trulia's Rent vs. Buy Index to see how buying San Diego real estate is cheaper than renting.

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Overall July prices and sales in San Diego were down, according to Dataquick. The county's real estate market has many nuances, so here's a breakdown of last month's numbers by sales type:

SINGLE-FAMILY RESALE: Resale houses typically make up the bulk of monthly total sales, in July's case: roughly 65%. This was the only subsection of the market that saw an increase in the number of units sold.

The median price, or the midpoint home value, was $360,000 in July, down 1.4 percent from June and down 5.3 percent from a year ago. Sales fell to 1,982 in July, down 9.7 percent from June but up 1.9 percent from one year ago.

RESALE CONDOS: July's median price was $205,000, down 6.8 percent month-over-month and down 8.5 percent year-over-year. Sales fell 10.6 percent from June and 5.1 percent from the same time last year.

NEW HOMES: New construction typically makes up the smallest slice of all transactions every month. Sales in July fell 31 percent from June, the largest month-over-month decline among the subsections. They were down from a year ago, too, falling 9 percent. The median price was $424,000, 15.5 percent lower than in June and 8.2 lower than the same time last year.

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