Are you ready to buy a home?

You might want to get your house in order before you start shopping. Here's what you need to do, and when.     

Buying a home can be a complicated process, and it can be particularly draining and disheartening for the first-timer.

Step 1: First things First...

Get your credit reports. Find any and all errors on your report and get them fixed or cleaned up. This will help you get a better rate on you mortgage loan. Look for accounts that aren't yours, collection accounts for debts you don't owe and negative marks (other than bankruptcy) that are older than seven years. Do what you can to improve your FICO score.

Step 2: Get Saving...

Save your money. What ever it takes, if you need to stop eating out, going to the movies, etc.  Do what you need to do to get financially ready to buy a home.  Put as much money aside as possible, using your desire to be a homeowner as a motivator. An FHA loan you generally need at least 3% down. Naturally, it would be better to have  5% down; boost that to 10% and you'll have even more financing options. Ideally, you'll also have enough left over after you get your mortgage to cover the payments for two or three months.

Put your bills on automatic. A single 30-day late payment can knock 100 points off your score, and it can take many, many months to recover. Make sure every bill gets paid on time. If you don't have a reliable bill-paying system, consider using automatic debits, so payments come directly from your checking account, or an online bill-payment system's recurring-payment feature.

Step 3: Know Your Mortgage...

Sort through your mortgage options. A lot of people are losing their homes today because they didn't understand what kind of mortgage they had or they accepted bad advice. The low teaser payments that allowed them to buy a more expensive house have jumped skyward, leaving them unable to pay. It's up to you to understand the risks of the different types of mortgages and to select the right one for your family. My opinion: Stick with traditional, fixed-rate mortgages. If you can't commit to a 30-year version, at least use a hybrid loan with a rate that's fixed for as long as you plan to own the home.

Research all the costs of owning a home. Your mortgage will be just the start. You'll have to pay property taxes and insurance on the home. There may be homeowners- or condo-association fees as well. You may face higher utility bills, and you'll take on maintenance and repair costs as well. Decorating your new house can cost a pile of money as well: Have you shopped for window coverings lately? Your home-owning friends and a friendly real-estate agent or two can help fill you in so you know what to expect or what you can do.

Adjust your saving strategies. What you've learned so far may inspire you to boost your savings. A bigger down payment, for example, can result in a larger home or a lower mortgage payment. Or you may simply want to build up your emergency fund so unexpected home expenses don't knock your finances off the rails.

Reduce your credit utilization. The FICO scoring formula is sensitive to how much of your available limits you're using on your credit cards and other revolving lines of credit. The less, the better. It doesn't matter if you pay your balances in full every month; the figure the scoring formula typically uses is the balance that shows on your most recent statement. Try to keep that balance below 30%, or even lower. If you can't — because you charge a lot for work-related travel, for example — make a payment before the statement's closing date to reduce the balance reported to the bureaus. Just be sure to make a second payment after the closing date, so you don't get reported as late.

By all Means DO NOT open or close any accounts. Until the mortgage process is completed and you've moved into your new home, continue to avoid actions that could potentially harm your credit, such as opening credit accounts or closing old ones.

Get an idea of the mortgage rate you can expect. Order a fresh set of FICO credit scores — don't worry, checking your scores doesn't ding them — and talk to a mortgage lender about what rates you might qualify for. Don't apply yet or give permission for your credit to be pulled; you just want to get a feel for what you can expect.

Understand the effect of mortgage-shopping on your score. You want to get the best rate and terms possible, which means you'll need to shop around, but how does that affect your credit score? Here's how it works: Every time you give a lender permission to check your credit, a "hard inquiry" appears on your credit report, and that can ding your score a bit. Fortunately, the FICO scoring formula lumps all mortgage-related inquiries made within a specified period and counts them as one. (The period used to be 14 days, but the most recent versions stretch that to 45 days.) Furthermore, the scoring formula ignores any inquiries made in the previous 30 days. So you want to do your serious mortgage shopping in a fairly concentrated period of time, typically after your offer on the home you want is accepted.

Get approved for a mortgage ahead of time.  Pre-approval, in which a lender gives a commitment to make you a loan, is different and more valuable to sellers than pre-qualification, which merely gives you an idea of the size of the mortgage you might afford without making any commitments. You don't have to get a loan from the lender that offers you a pre-approval letter. Getting a pre-approval does involve giving permission for a hard credit inquiry, but the small potential ding on your credit is worth it because you'll be in a stronger position with sellers. You will need a Pre-approval letter when we submit your offer on the home you have chosen.

Step 6: Start Shopping...

Research neighborhoods. We can go over neighborhoods, school districts, etc to find your ideal location. We all know is it fun to shop on the internet. Shopping for a home is no different. Work with your agent and let them know exactly what you want/don't want, what you can/can not live with. Your agent can help you save a lot of time by weeding out any homes that don't meet your criteria. Not All Information Is Available To The Public.

Once you've found your home and your offer is accepted

Step 7: Shop for a mortgage...

Finding your lender. There are thousands available, and sorting through the possibilities can be overwhelming. That said, you may want to include some of the biggest national mortgage lenders, local lenders and online brokers. You'll need to move fairly quickly to secure the loan, because the full approval process typically takes four to six weeks. YES, 4-6 Weeks.

Arrange for an appraisal, a home inspection and a walk-through. The appraisal is required for your loan to be approved. An inspection isn't necessarily required, but don't skip this essential step, which can alert you to serious problems before the deal closes. The walk-through is usually done within 24 hours of the deal closing, so you can make sure that the home sellers have performed any agreed-upon repairs and the place is in move-in condition. (Your agent will give you a list of reliable and licensed contractors).

Get homeowners insurance. Mortgage lenders require this coverage, and you'll need to prove you have it at closing. (Your agent will give you a list of reliable and licensed contractors).

Confirm how much money you'll need at closing. "Closing" is when you sign all the paperwork and pay agreed-upon amounts, which can include your down payment and your share of legal fees, paperwork costs, property taxes and title insurance.