First Time Home Buyer Don’ts

Earlier this week, I wrote a little bit about some things that first time home buyers should do when they are peparing to buy a home.  As there are many things you should do to increase your chances of becoming a first time home owner, there are also things you should not do as well.  Here are some of the don’ts for people considering purchasing a home.

Don’t switch jobs. Mortgages are very large loans.  Because they are putting up the money, lenders like to see a steady job history.  Getting a new job during the loan approval process could raise some red flags which affect your application. In most cases, career changes jobs will not affect your ability to qualify for a mortgage loan, however if you are qualifying for any specific types of loans because of your income, there may be trouble.  Find out how your potential job change will impact the approvability of your mortgage loan before it happens.

Don’t switch banks or move funds around.  Mortgage lenders will likely ask you to provide bank statements for the last two to three months on your checking accounts, savings accounts, money market funds, and other assets as part of the review process for your loan. To eliminate potential fraud, most lenders will need to see a thorough paper trail documenting the sources of all the funds you are using. It could become difficult for your potential lender to document your money if you change banks or transfer money to another account.

Don't finance any large purchases that will add to your monthly debt. Your monthly income and expenditures need to be within a certain ratio when you apply for a mortgage. By taking on more debt, your ratios could be affected adversely.  Major purchases to avoid include autos, expensive electronics, new furniture or anything else you’ve considering financing on credit.  Not using the credit you have is one thing, do not close any accounts or open any new ones without discussing how it will affect your credit with your mortgage consultant.

Don’t guess how much you can afford to spend.  Knowing exactly how much you can spend before you start your home search can make a difference between successfully buying a home and failure.  As was stated in the “do’s” earlier this week, do get pre-approved for a mortgage.  This will tell you how much house you can truly afford.  It will save you money by stopping you from shopping out of your price range, saves time because you can save your energy for houses within your price range, and heartache from looking at houses you cannot afford.

Don’t disregard your lender's requirements.  After you have been pre-approved for the loan, the work is not done.  In order to process your loan and fully approve it, you need to meet your lenders requirements.  You will need copies of your bank statements, W2s and other paperwork. Getting all of the papers into their hands as soon as possible will move things along a little more quickly.  No submitting all of the needed documents could cause you to lose your loan and worse yet, your prospective home.

Don't fall prey to predators.  With all offers, if it sounds too good to be true, it usually is.  Find out how long they have been in business and if there have been any complaints filed against them.  Ask any questions you need to in order to feel confident in their professionalism.  If you think there is anything not right about the situation, find someone else.  This applies to Realtors as well, don’t skip on any of the details.  Asking people you know who had good experience with a Realtor can be a starting point to making sure you have high quality representation.

Don’t make an offer on the first home you see. There are many homes for sale on the market these days.  At the time of this writing, it’s a buyers market, meaning you can take some time to see as many properties as you want to within your price range.  Taking the time to really look will make it more likely for you to find the right home for you. Once you find the home of your dreams, don’t let the seller know how much you like the property.  Tell them you’re looking at other properties, too.  And if you end up losing the home you set your heart on, remember there will be another one out there you’ll like as well.

Don’t agree orally to any deal. Oral contracts don’t hold up in a court of law. Be sure any contract you agree to and sign has all exclusions or other items you feel should be included in writing.  If the deal goes bad and something doesn’t make it in, you could be stuck.

Don't give an earnest money deposit directly to the seller. Your earnest money deposit belongs to you and no one else until the transaction closes.  If it’s a “For Sale by Owner” seller, they may not know that your earnest money should be applied to your expenses at closing. Get an attorney, neutral party, or trust account until you close on the home. Your purchase contract should dictate to whom the funds go should the transaction fall through.

Don’t take a home’s condition at face value.  There could be structural problems or even environmental hazards lurking within even the most beautiful looking homes.  Make any offer you make on a home contingent on it passing a professional home inspection.  You don’t want to be surprised on move-in day with a code or health violation.

Don't get in over your head.  If the house didn’t pass its inspection or is a “fixer upper,” don’t let your imagination get the better of you.  Know your home improvement project tolerance and ability to do, home improvement before you choose a fixer-upper.  If you don’t, you could end up paying a lot more than you had originally intended.

There are many factors to consider before you commit to buying a home. There are also some thing which need to be avoided at all costs.  Though what is listed here is not entirely comprehensive, following these guidelines to help keep you from some common missteps on the path towards home ownership.