Last week, we talked about the three steps that a first time homebuyer might want to take to begin the process of finding a home. My suggestions were to obtain a copy of your credit report, get pre-qualified for a home loan, and to attend a non-credit course in home buying at a local college.

Here are some questions that are frequently asked by first time buyers:

Q: Why is my past credit experience so important in the home buying process?

A: Because home lenders rely heavily on your credit score in determining whether or not you will qualify for a new home loan, and if you have had slow payments or charge-offs in the past, these will lower your credit score.

Q: Why can't I just get my credit score directly from the three credit bureaus? Why do I have to examine my full credit report carefully?

A: Your three digit credit score is calculated by computers which look at only the information obtained in your credit report. No other data is considered by the computers in determining your score.

Because so many consumers have similar names and addresses, the credit bureaus can sometimes mistakenly place information from another persons file in your credit report. If that information is negative, it can have a powerful impact causing your score to be much lower. And this might prevent you from obtaining the loan you need to buy your home.

By the way, you certainly can obtain your numerical score from each of the three national reporting bureaus, but each now charges a fee for the service. Both myfico.com and transunion.com offer a "three-score" package for about forty dollars, but you can obtain your reports for free at annualcreditreport.com.

Q: What if I disagree with some of the information on my credit report?

A: Each of the three bureaus provides a way for you to dispute or explain any of the data listed on your report. The bureau is required by law to investigate your dispute, and report their findings back to you. If you still disagree, you may enter a statement of dispute in your file.

Q: How can I find out what factors go into the process of determining my credit score?

A: The best discussion I have seen anywhere is available free at myfico.com.

Q: Exactly what is involved in getting pre-qualified for a home loan? Is there any cost involved? What do I get?

A: A prequalification meeting is an informal discussion between you and a loan officer in which the lender makes a non-binding estimate of how much loan you might qualify for based on the verbal information you have provided.

It is not a commitment for a loan, but rather a preliminary estimate, and is not binding on either you or the bank. You have no obligation to use that lender, and they have made no promise of approval to you.

However, it is extremely helpful for you to get pre-qualified for two reasons.

First, you will hopefully get a rough idea of the loan amount you might be able to qualify for once you do find a house you like. And second, the lender will likely pull all three credit scores for you, giving you access to the actual numeric scores. If there are serious problems on your credit report, you will find out directly from this lender.

In addition, by meeting and talking with a loan officer, you will learn what it’s like to answer a large number of intrusive questions that you may not be comfortable with. Get used to it, because it’s just part of the loan application process.

Q: Is this the lender that I will be using when I find the house I want to buy?

A: That decision will be up to you. When the time comes, I recommend that you shop and compare rates and terms among several reputable lenders so that you can be sure of getting a competitive offer.

Q: What is the difference between getting pre-qualified and getting pre-approved?

A: In general, prequalification implies no obligation on the part of either the applicant (you) or the lender. It is simply a hypothetical discussion, involving no cost or commitment.

In contrast, getting pre-approved means that the lender will complete a formal application, and will issue a written statement that you are already approved for a certain dollar amount of loan. This process typically takes at least a week and costs as much as one percent of the amount being borrowed.

I do not recommend paying any fee in advance for any pre-purchase counseling, because you have no way of knowing that the lender will be competitive when the house you wish to purchase is found. In addition, it is just not necessary.

Q: Where can I find a non-credit course on home buying?

A: Many community colleges offer a three to six hour course that covers the most important topics in home buying. Likewise, your church or local bank or credit union may offer such a class. The cost should be minimal, certainly under a hundred dollars. Classes sponsored by the instructors may even be free.

Know that these courses are often conducted by real estate professionals and home lenders, and that they hope you will decide to use their services when you get ready to start looking for a house. There is certainly nothing wrong with this practice, but you should feel no obligation to buy services from anyone you meet in such a class. Always shop and compare to find the right opportunity for you.