Even as you consider your strategy for buying a home, you should be paying attention to your current credit status. Any lender is going to scrutinize your monthly income and outgo at the time you apply for a mortgage.

Debts and other obligations reduce the amount of cash you can spend on housing, so try to clear the decks as much as possible before applying for a loan. Pay off as many high-interest consumer loans as possible. If you are planning to buy a new car, boat or major furniture (paying by either cash or credit), postpone the purchases until after you've bought your home.

Mortgage lenders now request a mortgage credit score from credit bureaus to help them determine your creditworthiness. The score is determined by a statistical analysis of the information contained in your credit file. A good score may change the time required to get approval on your mortgage as well as the rate you receive and the way in which your mortgage is managed.

The analysis takes into account about 100 variables gathered from your credit file at one of the big three credit bureaus -- Experian, Equifax and Trans Union -- and specifically looks at such things as how much you are currently in debt, how many places you have applied for credit recently, and what kind of credit you have taken in the past.

Before you apply for a mortgage loan, find out whether anything in your record might present a problem. Order a report two or three months before making a loan application to give yourself plenty of time to iron out any wrinkles that you discover.

Prequalify with a lender

The next step is a visit with a lender -- mortgage company, savings and loan, bank or credit union -- where you can translate all the data into hard facts about the upper price limit you can handle and the types of mortgages suited to your needs.

The prequalifying interview should be free, and at some institutions can be done over the telephone. Remember to bring tax returns, salary stubs and other financial data to the prequalifying interview -- along with net worth and monthly cash flow worksheets you've prepared.

You'll want to find out how much mortgage debt you can carry under the most commonly available mortgages.

Because the 30-year fixed-rate mortgage is still the benchmark against which other loans can be compared, find out what size conventional 30-year loan you can qualify for under the guidelines issued by secondary-market mortgage buyers such as Fannie Mae or Freddie Mac (these are known as "conforming" loans).

Also get information on one- and three-year adjustable-rate mortgages, as well as a 15-year fixed-rate loan. Knowing what you can afford to buy with these four mortgage types is a useful starting point.

Finally, remember that you are not obliged to use the lender who prequalifies you. When you're ready to borrow, compare the rates and mortgage options available from several lenders.

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