First-Time Homebuyer Tips: 15 Things to Avoid Before Buying a House

Buying your first home is a thrilling journey, but it can also be fraught with potential pitfalls. Many first-time homebuyers are absolutely baffled at all the different ways a loan can go wrong from the time you get a loan pre-approval to closing. We don't want to see you lose out just days away from closing on your new home. Let’s take a closer look at 15 things you don't want to do before buying a house.

Don't Miss any Debt Payments

You want to stay current on all of your credit cards, auto loans, student loan debts, and any other debts you have. Missing just one payment could seriously derail your mortgage approval process. You might be thinking, “Well, they pulled my credit score upfront, Andrew, and that was a hard inquiry, and they told me I had a loan commitment letter.” Yes, but... and... then... 

Picture this: about three to five days before you get the keys in your hand, they will do a soft pull on your credit. This is the lender double-checking to ensure there are no new lines of credit and that you're still current on all your loan payments to ensure you’re ready to go with your mortgage.  If a lender sees a large purchase was made on credit, they will have to factor into your total monthly debt-to-income ratios.  If your credit score falls below the minimum score needed for the type of home you're getting, then it could possibly kill the deal.  

In all cases, it is essential to keep open, honest, and transparent lines of communication with your buyer's agent and mortgage officer. They can't help you with what they don't know about, so by being upfront, in most cases, they can help you move forward and close on your new dream home.

Avoid Debt Consolidation Woes

Debt consolidation might sound appealing, but it can be a terrible idea while you're in the process of getting a home loan.  Before consolidating any debts, discuss it with your loan officer to review your situation. If you're in the closing process, it's probably a no-go, but if you’re planning well in advance (three to 12 months), it could be a good idea.

Don't Change Employment 

Changing your job during the closing process can be a massive mistake. If you’re switching from a salary to an hourly position, or even if you’re getting a higher salary, it can affect your loan pre-approval. Lenders need to verify your employment and ensure you have a stable income. If you must change jobs, ensure it doesn’t affect your approval by discussing it with your loan officer first (if possible).

Don't Make Large Money Moves

Moving large sums of money around can raise red flags. For instance, if you move $5,000 from your savings to another account, the lender will ask where that money went and why. The best practice is to leave your money right where it is from the time you get your loan pre-approval through to closing.

Don't Break Up with Your Bank

Switching banks before closing on a house is a bad idea. You need to show stability, and changing banks can disrupt this. Stick with your current bank until after you've closed on your new home.

Hold Off on Buying a New Car

Buying a new car when everything is going well might seem like a great idea, but doing so can throw off your debt-to-income ratios and credit score. A new car loan means a new hard inquiry on your credit, which can jeopardize your home loan approval.

Don't Buy Furniture on Credit

Avoid the temptation to buy new furniture on credit before closing on your house. This can alter your debt-to-income ratio and impact your loan approval. Wait until after you have the keys to your new home.

Don't Make Large Deposits

Large deposits into your bank account can raise questions. Lenders need to know where the money came from, especially if it's a significant amount. Depositing large sums of cash can be problematic because it’s hard to trace. Always consult with your loan officer before making any big deposits.

Don't Pinocchio Your Loan Application

Be honest on your loan application. Lenders will verify all the information you provide, so stretching the truth can derail your loan process. Contact your loan officer for clarification if you’re unsure about any details.

Avoid Hard Credit Inquiries

Aside from the hard inquiry from your mortgage lender, avoid seeking new credit during the closing process. Multiple inquiries can lower your credit score. If you need to rate shop for mortgages, do so within a 30-day window to minimize the impact on your credit score.

Don't Blow Your Buyer Closing Costs

As of writing this post, buyer closing costs typically range between 2% and 4% of the sales price. For example, on a $300,000 home, that’s about $9,000. Make sure you have enough money saved and avoid spending it before closing.

Don't Max Your Budget

Just because you’re approved for a certain loan amount doesn’t mean you should spend it all. Stay within a comfortable monthly budget that allows you to cover all your expenses, including taxes, utilities, and living costs. This will ensure you’re not house-poor.

Don't Co-sign for Anyone

Co-signing for someone else’s loan means you’re responsible if they default. This can increase your debt-to-income ratio and affect your loan approval. If you choose to co-sign for someone, avoid co-signing until after you’ve secured your home loan and officially closed on your new home.

Don't Overpay for Your Home

You might be tempted to overbid on a house in a hot real estate market. However, if the house doesn’t appraise for the higher amount, you may need to cover the full difference out of pocket. Make sure you’re comfortable with the price you’re willing to pay.

Don't Forget to Google Your Agent

Make sure you’re working with a reputable real estate agent. Google their name, read reviews, and check their past sales performance. A good agent will guide you through the process smoothly and answer any questions you have along the way. 

Follow these 15 tips to navigate the home-buying process smoothly and avoid common pitfalls. Remember, the key is maintaining financial stability and avoiding making significant changes until closing your new home. 

If you plan to buy or sell a home in the Las Vegas, Nevada area, please contact me.

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