Looking to buy? Don't do these 7 things
As you choose the path that leads to the home of your
dreams, you can take either a pleasant Sunday stroll in the park
or a gut-wrenching tiptoe through a minefield.
As with most minefields, the worst thing you can do
is to plow ahead without knowing what you're doing. We enlisted
the aid of three experts for their advice on land mines to steer
clear of when you're first getting ready to buy a home.
Here's their list of the seven most-important
"don'ts" when you're considering buying a new house -- particularly
if you're a first-time home buyer.
Don't go it alone.
It's wise to have your own buyer's agent and attorney.
Don't rely on the seller's real estate agent, no matter how nice. Remember, that agent's loyalty is to the seller.
Shop for an agent experienced in representing buyers, especially
if you plan to look at homes for sale by the owner (FSBO). That
owner may not know about certain restrictions and disclosure laws,
is "conveniently" forgetting them, or just doesn't care
about them. Buyers' agents often have such abbreviations on their
business cards as ABR (Accredited Buyer Representative), CBR (Certified
Buyer Representative), or CEBA (Certified Exclusive Buyer Agent).
The secret is to retain the agent before the search starts. Shop
also for an attorney, if you're going to use one -- and if you're
a first-timer this is not a place to save a few hundred dollars.
Get references from friends and neighbors and the real estate agent
you've chosen. Meet with the attorney before you start house hunting.
All too many buyers retain an attorney after they've already signed
a contract. Bad move.
Don't go buying a lot of junk.
Or even quasi-junk. Draining your savings or running up credit card debt to buying a new living room set, a big-screen
TV or a new car could make a difference in your interest rate and
whether you even qualify for a mortgage. Avoid spending money
until after the closing is completed, whether by credit card or
with cash. Keep debt down and as much money in your bank account as possible.
The lender will check bank and credit card accounts.
Don't change jobs.
Unless it can't be avoided through such things as drastic location
changes, the experts say it's best not to change your employment
picture until after closing. A worse move yet is to change from
a salaried position to self-employment. Lending institutions like
to see steady employment and generally insist that self-employers
show two years of successful income.
Don't be too trusting.
Just because the real estate agent seems caring and knowledgeable,
don't forget, they work on commission. Don't put your life completely
in someone else's hands. Only you can protect yourself. All too
many home buyers place too much trust in others -- agents, the seller,
title agencies, etc. Do your homework, become familiar with the
entire home buying process and protect your own interests.
Don't mess up your credit.
Don't go running around "fixing up your credit"
without talking to a professional. You may think you're going to
bump your score up a few notches by canceling a bunch of credit
cards, for example. But canceling the wrong ones for the wrong reasons
can seriously damage your credit score. Credit experts say
it's important not to have too few or too many open credit accounts, and the best credit is old credit.
Another possible pitfall is to transfer all your credit card balances
to one card to get zero balances on the others. Your credit score
actually will be higher in most cases if your balances are spread
out across several cards.
Similarly, don't pay your
bills -- at least not all of them. Paying credit cards down
to below 50 percent of the your credit limit is generally helpful
to boosting your score, but paying off all your debts is only wise
if you still have enough cash when it's over to take care of your
down payment, closing costs and prepays. In other words, don't deplete
you entire savings to pay off your credit cards.
Don't think about lying. Lenders
want to know how much cash you have to put into the house -- truthfully.
If you're borrowing the money for a down payment and have to pay
it back, it will have an effect on your ability to meet all your
obligations. If it's a gift and doesn't have to be paid back,
that's fine. But whatever you do, don't borrow it from your uncle
and tell the mortgage banker it's yours -- the bank may ask you to document
how long you've had it in that bank and where you got it from. A
lie could backfire and ruin your whole deal.
Don't do any spring cleaning.
Don't throw out bills, bank statements, or tax returns. A
better idea than cleaning out is organizing all your important papers
that may well be requested by a lender, such as W-2s, 1099 income
statements, recent pay stubs and tax returns for the past couple
of years if you're self employed. While you're at it, round up your
prior title insurance policy, and any canceled checks, settlement
statements or other proof that you paid collections or disputed