Buying a first home can be exciting and scary at the same time. It is a big decision and should be made with proper planning and strategy.

Those considering the purchase of a first home should study the following steps to prepare for home ownership. The more planning there is, the more prepared the buyer will be, and the more successful that first home-buying adventure will be.

-- Pull your credit reports. North Carolina allows residents to pull a credit report from each of the three credit agencies (Equifax, Experian, and TransUnion) once per year at no charge. Take advantage of this freebie whether you’re buying a home or not. Review the report for errors that could bring higher interest rates. Look for accounts that aren’t yours, negative balances that may or may not be owed, and any negative marks, other than bankruptcy, incurred more than seven years ago. It is not uncommon that these agencies make mistakes. Reviewing your credit may also help to prevent identity theft.

Consider adding a letter explaining any negative marks that will not be eliminated. This letter can be considered by financial institutions when reviewing credit for mortgage applications. Also consider a credit monitoring service, which will notify you of an activity on your credit.

-- Improve your FICO credit score. This three-digit credit score is used to gauge risk level and creditworthiness. Financial institutions will consider this score to determine loan terms and interest rates. You can obtain a FICO credit score by visiting myfico.com. Improve this score by paying bills on time and paying down existing credit. Do not apply for credit while you’re on the mortgage hunt. Every investigation into your credit can affect the credit score.

-- Don’t live beyond your means. Financial institutions will understand most long-term debt, such as student and auto loans. They will not appreciate short-term debt, such as excessive credit card debt and pay day loans. These are red flags that someone is living beyond his means. A home mortgage will only add to this dangerous lifestyle. In addition to mortgage payments, many expenses are added when purchasing a home, such as insurance, property taxes, home repairs and decorating. The FICO credit-scoring formula considers how much of the available limits a person is using. It’s best to keep this to 30 percent or below to maintain a decent credit score.

-- Schedule a budget for yourself. Now, more than ever, you will want to save money using home ownership as a motivator. Living on a budget can be difficult, but simple steps such as limiting restaurant dinners and cutting back cable subscriptions can help. When it comes to saving for a new home, every little bit counts. When I purchased my first home, I cancelled my home phone service. After seven years, I haven’t installed a home phone. My cell phone works perfectly, and I save about $30 per month.

-- Consider using automatic bill-payment options. Most companies offer automatic-draft payment options for consumers. This will eliminate the risk of late payments. A single 30-day late payment can reduce your credit score by 100 points.

-- Research your mortgage options. Use your credit scores to discuss possible interest rates with financial institutions. Don’t authorize them to pull your credit until you are really ready. Inquiries into your credit can affect your score. At the beginning research stage, you can provide your score and discuss options. Be leery of low “teaser” payments that allow you to buy more home than you can afford. Consider fixed-rate mortgage options or a hybrid loan that offers a fixed rate for an extended period of time. Be sure the rate is fixed for as long as you plan to live in the home.

-- Determine what you can afford. Research all the costs of homeownership. Many people commit to mortgages in a budget, but fail to consider association fees, higher utilities, home maintenance, insurance and property taxes. Estimate these payments and subtract it from the monthly budget. This will help determine the monthly mortgage payment. Find a home or mortgage slightly below this number and build in a bit of cushion for the unexpected. Use a mortgage calculator, found online, to help calculate your mortgage cost, interest rate and down payment.

-- When you have determined a mortgage budget, request a pre-approval letter from the mortgage company. This letter will help home sellers take your offer more seriously. There is no commitment to accept a mortgage from the company that provided the pre-approval letter. When you’ve found the home of your dreams, it’s time to start shopping for your mortgage. The full approval process typically takes four to six weeks, so set aside plenty of time.

-- After your offer has been accepted, arrange for an appraisal and a home inspection. The financial institution will require an appraisal before approving any mortgage, and a home inspection will help root out potential problems with the home. You may reconsider your offer after an inspection and negotiate needed repairs.

-- Investigate homeowners insurance and select a coverage option. You will be required to prove insurance coverage prior to closing. Also, confirm closing costs prior to closing. You may need to have funds available in certified funds to cover your down payment and other costs associated with closing.

-- Stay in contact with the mortgage lender and real estate agent. They can keep you informed throughout the process and ensure that there are no surprises on closing day. When closing day is scheduled, contact movers to confirm an appointment. Waiting until the last minute may leave you moving yourself. Don’t let the stress of finding the right mortgage overshadow the excitement of purchasing a first home. Following these simple steps and planning in advance will ensure homeownership.

For information on this topic or other moving related topics, contact Brooke Wilson at Two Men and a Truck, (919) 309-9582 or e-mail at brookew0124@us.twomen.com.