One of the first steps any prospective buyer should take is to take advantage of the free credit reports everyone is entitled to request annually, thanks to federal law. While there are many sites on the Web offering "free" credit reports, many of those offers require that you sign up for a free trial of a credit-monitoring service that will cost money if you fail to cancel during the free trial period. The official site where you can get free, no-strings-attached credit reports annually from the Equifax, Experian and TransUnion credit bureaus is www.annualcreditreport.com . You can receive one free credit report from each of these three agencies every year.

David Reed, an Austin, Texas, mortgage banker and author of "Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You," says you should review each of those reports for errors. There could be mistaken entries noting late payments or account information that belongs to someone else. Common names sometimes get mixed up on credit reports, as do "Juniors" and "Seniors" in the same family.  "I see that a lot," says Reed.