You may have heard lots of advice about what you should do when looking for a home. Here's the list of the eight most-important "don'ts" when you're considering buying a new house -- particularly if you're a first-time home buyer.
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 they are! That agent's loyalty is to the seller. Shop for an agent experienced in representing buyers before your search starts. Looks for abbreviations on their business cards like ABR (Accredited Buyer Representative), CBR (Certified Buyer Representative), or CEBA (Certified Exclusive Buyer Agent).
Also, find an attorney, if you're going to use one. 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.
Draining your savings or running up credit card debt to buy new furniture, 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.
Unless you are relocating for a new position, the experts say it is best not to change your employment picture until after closing. And definitely don't make the leap 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.
Remember that real estate agents work on commission and others involved in the purchase process may have a financial interest in completing the transaction - but its your home and your mortgage, so don't put your life completely in someone else's hands. Only you can protect yourself. Do your homework, become familiar with the entire home buying process and protect your own interests.
Don't try to "fix up your credit" without talking to a professional. You may think you'll increase your score by canceling a bunch of credit cards or transferring balances to one card to get zero balances on others. But making the wrong moves can damage your credit score. Experts say it's important not to have too few or too many open credit accounts, and the best credit is old credit.
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.
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 impact 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.
Keep your bills, bank statements, and tax returns. Rather than cleaning out, organize your important papers such as W-2s, 1099 income statements, recent pay stubs and tax returns for the past couple of years. The documents may be requested by your lender and knowing where to find them may speed up your loan approval process.