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3 Things to Avoid When Buying a Home

Buying a home, particularly for first time home buyers, can be really stressful. When we bought our first home, I worried about everything from whether we were buying the right home to whether we were spending too much money. I remember our mortgage payment was about $1,200 a month, and I was terrified that we wouldn’t make it.

To keep the stress to a minimum, there are certain things you should avoid doing when buying home. In fact, taking some simple steps in the year leading up to your purchase can save you thousands of dollars in mortgage interest charges. It can also reduce the chance that your mortgage application will be denied. So here are the top 3 things to avoid when buying a home:

1. Ignoring you credit score: If you are planning to buy or even refinance your home, you should know the answer to this question: What is my credit score? If you don’t know what your score is, then you need to get your free credit score and track it.

Your FICO credit score will have a huge impact on what interest rate you can get on your mortgage. For example, at today’s rates, a credit score of 760 or higher can result in an interest rate as much as 4% lower than a credit score of say 500 or less. In addition, even to qualify for certain types of traditional mortgage products you need a credit score typically above about 620. But the key is to realize that your credit score is absolutely critical when you are buying home. A good credit score can easily save tens of thousands of dollars in interest over the life of the loan.

2. Changing Jobs: When it comes to mortgages, there is one critical thing you need to realize–the bank will check your credit report not only when you apply for the loan, but shortly before closing as well. This is a fairly new procedure mandated by Freddie and Fannie. And this means you want to avoid any changes in your financial picture until you’ve closed on the property. And that includes changing jobs.

Now, changing jobs doesn’t necessarily mean your mortgage will be denied. But it does mean the mortgage company will have to reevaluate your mortgage application. They will have to go to your new employer and get the same job and salary verification that they get from your old employer. The point is, at best, it could delay your closing. And that could result in a forfeit of deposits or at least a big headache. So avoid changing jobs if you can until you are in your new home.

3. Applying for new credit: Much for the same reasons you shouldn’t change jobs, you also shouldn’t take on new credit accounts, including credit cards. The credit card application will show an inquiry on your credit report, which can lower your credit score. This can affect the interest rate on your home loan.

Avoiding new credit when buying a home can be difficult. Many people take advantage of 0 balance transfer offers, for example, to make repairs on a house they are selling or the home they intend to buy. And then there is furniture and window treatments for the new home. As exciting as this process can be, you are better off waiting until after closing before taking on new debt.

For more home buying tips, check out this Q&A from HUD.

{ 50 comments… add one }

  • ElizabethL August 23, 2010, 12:14 pm

    Great post! Here’s some tips on getting your finances in order before buying a home that I thought I’d share (hope it can help someone out)
    http://www.paynefamilyhomes.com/blog/7-things-you-must-know-before-buying-your-first-home/

  • Augusta Real Estate Directory September 21, 2010, 2:45 pm

    Good idea to check your credit before you start looking for a home, it will give you the opportunity to fix mistakes which will help greatly when your ready to commit to a place.

  • Bert February 23, 2011, 11:27 am

    Great info! Availing another loan to refinance your mortgage is not a good idea. You must also consider your credit score and if you can afford to get another loan to finance your property.

  • Property for Sale June 3, 2011, 3:05 am

    Great information about job changing–that can definitely call for a re-evaluation of the loan.

  • Rent Office Space June 4, 2011, 3:10 am

    Great information about job changing

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  • Property for Sale June 10, 2011, 4:50 am

    Article on credit mistakes to avoid when buying or refinancing a home.

  • Expat Rentals Singapore June 29, 2011, 8:36 am

    Gr8 article

  • Bob Urbanowski August 29, 2011, 11:11 am

    I would never have thought about the job changing. Luckily, I don’t plan on changing jobs any time soon!

  • Brian September 2, 2011, 5:58 am

    Ya Very True, I like your idea, which you have mention in your First Point that, It is very necessary to know your credit score before buying a house, Nice Post, Well Done……:)

  • Loan modification get approved October 14, 2011, 6:05 am

    Thanks Rob. Short but sweet:)

  • Real Estate Agents in Abu Dhabi November 3, 2011, 8:54 am

    Thanks for sharing this informative post because I want to buy a property in next upcoming days. I know that there are so many important things to keep in mind.

  • Connecticut houses for sale December 27, 2011, 4:24 am

    Thank you for posting this fantastic blog. I find it so very difficult to remember all the things I must do to stay in touch and keep on top of my game.

  • Real Estate Calgary January 1, 2012, 1:53 am

    Home buying is a major decision so it will be important to avoid the mistakes that will only make a failure out of the investment made.

  • Gabe Sanders March 31, 2012, 11:54 am

    I’ve seen it all too often. Getting ready to move into a new home and days before the closing, buying new TV’s, furniture, etc. Too the point that the lender pulls the mortgage and refuses the loan. Listen to this advice!

  • selene April 26, 2012, 11:32 am

    that’s about right
    you should never apply for credit dept

  • JOEL September 25, 2012, 2:42 am

    Nice article you got there :) It gives a lot of idea to me.

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  • Ben Koshkin November 5, 2012, 8:34 am

    Great post, it is important to take an insight of your credit before going for a home so that you can easily cross check your mistakes and short out.
    Ben Koshkin  Owner  CP Blacktop LLC

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  • Real Estate India December 12, 2012, 8:42 am

    Thanks for the great article. Really helpful..

  • CDO Realty January 18, 2013, 9:29 pm

    Great reminder Rob, even if it sounds so obvious it’s good to remember all this. Buying a home is actually a big commitment, people tend to forget this.

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  • Mel Laurence April 16, 2013, 12:46 am

    For first homebuyers or investors, the big thing to ignore are the butterflies that come from irrational fears. There are many sources for these butterflies. They include parents who were too scared to buy, fear of commitment, or property doomsayers. But property investment decisions should always be based on strict buying criteria. Once you meet your buying criteria, the butterflies should soon vanish!

  • Property Management San Antonio April 21, 2013, 12:17 pm

    It pays to stay at your job for several years. Perhaps at least 5 years. This will somehow guarantee lenders that you have stable income and you will be able to pay what they’re willing to lend you.

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    I always recommend that the purchase go with an older relative who has already purchased a property. In this way, you can be advised by another experience. The older person will show more advantages than just a commercial agent.

    Good article.

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    Buying home is a big item. It’s best to do proper finance planning to ensure the mortgage is truly comfortable.

    In Singapore we have dual key homes where you can rent out one of the suites with a separate doorway. This allows you to have a additional rental income to subside the mortgage if you don’t need to use the suite.

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    It pays to start saving early, plan your finances properly, and plan 5-10 years ahead while purchasing a home. It’s not good to purchase a home just because you are going to be getting married, but having a share home owner does reduce the amount of commitment on the mortgage of the house you are looking at.

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  • Hexacube Changi January 26, 2014, 2:31 am

    Thanks rob. There needs to be a directory or some sort teaching real estates agent to educate their clients.

    Some home buyers thinks they knows everything and overstretch themselves. As a real estate agent, i see myself giving them the right advise and helping them to plan their investment.

  • Rivertrees Fernvale January 26, 2014, 2:32 am

    credit score, over leveraging and not being vigilant when managing your financial capability, and over stretching yourself is the biggest reason why there are so many fore closure in the country. Do your calculations properly people!

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  • Kevin February 20, 2014, 8:28 am

    Never thought about how changing jobs would delay the process, you’d always think it is for a higher salary but I guess banks don’t see it that way…

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    Before investing real estate, be very sure of your own financial standing in order to avoid headaches in the future.

  • Hallmark Residences March 3, 2014, 10:02 pm

    A tip on after purchase as well is to always check on your rights to refinance your mortgage to make good use of current low interest rate.

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  • Cleo from Cyprus 101 properties March 10, 2014, 3:22 pm

    I just want to add that in some cases just opening up a new bank account may look bad and will cause a problem when trying to get a mortgage. So you don’t want to do much of anything except the usual things that got you the good score.

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