First Time (Or Any Time) Buyers

As a first time home buyer, there are a number of pre-purchase tasks you need to perform.

Six months before you apply for a home loan (mortgage) get copies of your credit reports. You can do this for free online at annualcreditreport.com. There are three major credit bureaus - Equifax, Experian and TransUnion. Review each of these three reports CAREFULLY. If you see an error, contact the credit bureau and request that they correct it. The three credit bureaus don't share information so even if you correct an error on one credit report, you will have to do the same for the other two. If a credit bureau refuses to correct a mistake, you can sue.

Find out what your credit score is and take steps to improve it. Your credit score is a number between 300 and 850 and it evaluates your risk as a borrower. The higher the score the better. This number must be purchased separately from your credit report. You can go to myfico.com to purchase your credit score. The median FICO score in the U.S. is 723, according to myfico.com (end of 2007). If your score is below 620, you need to spend some time improving it in order to qualify for a mortage with a competitive interest rate.

• For help improving your credit score and paying down your debt contact the National Foundation for Credit Counseling or call them at 1-800-388-2227.     
• To improve your credit score quickly, always pay your bills on time and pay down the total amount you owe (i.e. make MORE than the minimum payment amount every month).

Get pre-qualified by a home loan provider. SHOP AROUND for financing! We strongly suggest using a local or regionally based mortgage provider--beware of out of state, internet based loan companies, as there are many disreputable ones floating around in cyberspace.

• Mortgage providers should give you a "Good Faith Estimate" as to your cost to secure a home loan with them. If they don't do this, run like crazy.
• Don't just compare the interest rate that you are being offered, but look carefully at other associated costs. Beware of junk fees. These are charges imposed on borrowers by the lender for services that don't provide a specific borrower benefit. Junk fees include fees for underwriting, administration, origination, warehousing, documentation, loan review, preparation, and other names dreamed up by some lenders. Examples of legitimate charges for specific services provided include an appraisal fee, title insurance fee, attorney or escrow fee, and credit report fee.
• The "no-cost, no-fee" mortgages being advertised include all the lender charges in the interest rate.

Once you have chosen a mortgage provider get PRE-APPROVED by that company. Compared to being pre-qualified, getting pre-approved involves submitting verifiable personal financial information like pay stubs, past tax statements, copies of bank statements, etc. Being pre-approved means that you will have a realistic idea of the price range you can afford.