Things NOT to Do When Buying a House
Tears should never be a part of the home buying process. This article is the aftermath of a sad experience, and is written for YOU, so that you can share this information with those buying a home and so that they do not encounter the same experience.
In this article we reached out to 15 Real Estate Experts and asked them for their BEST tips on what NOT to do when buying a house. Here is what transpired...
Tony Mariotti | RubyOneMortgage.com
Borrowers can set themselves up for home buying success if they do two basic things: get pre-approved and stay pre-approved.
Pre-approvals show everyone involved in the transaction that you are a serious buyer. You will get the attention you deserve and any offers you make will be legit in the mind of the seller. You will know how much you can afford so that your home search is efficient. And your Realtor will come up with better suggestions!
Pre-approvals typically take less than 24 hours and only require some basic documentation like:
• A credit report (pulled by your lender)
• Identification (e.g. driver’s license)
• W-2s (2 years)
• Recent pay stubs (30 days)
• Recent bank statements (2 months)
• Current assets
Get a pre-approval letter from your lender. It’s physical proof that you are ready to buy a home.
Home buying will be much smoother when you have a pre-approval letter in hand. The key now is to not invalidate it.
At this stage, start thinking of yourself as a lion tamer at the circus. No sudden movements! Do not change anything about your financial situation. At all costs, avoid the following:
• Change jobs
• Open new lines of credit
• Close existing credit card accounts
• Deviate from any expected financial behavior (paying bills on time, etc.)
• Deposit or withdraw large sums of money from your bank account
• Open or close any bank accounts
• Get behind on current debt payments
• Conceal or fail to document down payment gifts
Lynn Pineda | ImagineYourHouse.com | Coral Springs, FL
Buying a home is huge! You need to make sure that you’re well prepared before you even get started, which is a whole other topic of discussion, yet for today’s discussions it’s all about what not to do.
All too often, I find home Buyers wanting to dig in their heels during the negotiation process for crazy reasons that result in them losing the home they thought was going to be just right for them. When the home Seller doesn’t want to fix those non-working GFCI outlets, the pipe leak under the kitchen sink and a few other items that amount to about $1000, do you really want to let what really amounts to a nominal dollar amount risk you losing the home you love, because you think the fact that you offered him full list price along with your killer Pre Approval letter attached that he should fix those items?! Dang it, he just should, you think, because you’re just the perfect Buyer and it’s a matter of principle, it’s the right thing for the Seller to do, you think. Really?!
What do you think is likely to happen after you lose one home over this action? You eventually come to your senses after going through this a time or two, and realize that it really isn’t such a big deal as you will always find many things that pop up on a home inspection report that will need fixing. Homes aren’t perfect, just like we humans aren’t. You don’t have to be an admirer of the home Seller and how they conduct themselves as they don’t go with the home. Skip the matter of principle next time.
As a dedicated Real Estate professional, Lynn Pineda sells home in Southeast Florida covering the areas of Coral Springs Real Estate to Boca Raton Real Estate. It’s what she loves to do!
Joe Samson | GreatCalgaryRealEstate.com | Calgary, CA
Thanks Ryan for asking me to provide my two cents on this very important topic of things that clients shouldn’t do before buying a house. Real estate professionals and lenders often shake their heads when they find out that a client had quit his job or financed a new car just before closing the deal. Major financial or employment changes is most likely going to T-bone a real estate transaction. Then everyone involved will be left behind to scramble to try to pick up the pieces to save the deal.
My first thought that came to mind was that even though these unfortunate scenarios happen all the time, the question is always flipped in the air is: who is at fault?
Obviously everyone needs to take responsibility to some degree (yes, even the client). But at the end of the day somewhere upstream the buying process, the client should have been advised about the pitfalls to watch out for that could jeopardize their home buying plans.
I truly believe that a reputable real estate agent’s job isn’t about selling houses or a mortgage broker’s job isn’t simply about hooking-up the client a lender. Rather, and foremost a real estate professional’s job needs to be all about educating their clients and becoming their personal coach for the time it takes to finalize the transaction.
But at the same time, there are too many buyers out there who are not willing to make the commitment to be helped and they think that they can do everything on their own. In my opinion this is the biggest risk that a home buyer can impose on themselves. It is simply mind boggling why a buyer wouldn’t want to accept advice from someone who has years of experience in buying and selling homes.
In the end, it takes two to tango. Great real estate agents and lenders need to provide top notch services and their clients needs to be open to receive the advice to create a successful closing.
Bill Gassett | MaxRealEstateExposure.com | Hopkinton, MA
One of the things that first time buyers rarely ever think about when purchasing a home in a hot market is overpaying says top Holliston Mass Realtor, Bill Gassett at RE/MAX Executive Realty. In speaking with Bill he mentioned the following “With real estate markets around the country heating up there are properties in competitive price points that are receiving multiple offers.
When owners get multiple bids of their home it is not uncommon for the sale price to be pushed significantly over asking. While a buyer may be willing to do this their lender may not! When the appraisal does not come in at the agreed upon purchase price, the buyer can end up either getting stuck putting more money down to make up the difference or if they're not in a position to do so, be rejected for a mortgage outright. This can put buyers in a really tough spot if they have already given notice on their current housing. Buyers need to understand the whole process of buying a home especially when it comes to financing”!
Anita Clark | SellingWarnerRobins.com | Warner Robins, GA
One of the things many buyers want to do is quite possibly one of the worst things they should do when trying to buy a home. What should they avoid? Buyers should not seek out personal contact with the sellers. Selling a home is an emotional event, and even the slightest comment can upset sellers, which may change the negotiation process from one where the participants are cooperating to an adversarial situation.
Key things about the home should be identified during the home inspection process and parlayed through your agent for clarification, more information, or a history of. Using your agent to ask these questions and alleviate concerns will keep emotional outbreaks to a minimum and help keep the home buying process moving forward.
Routine information that has nothing to do with the sale of the home should wait until after closing and contact between buyers and sellers should be kept to a minimum until the keys have exchanged hands. While buyers may be inquisitive and want to know why the upstairs bathroom is purple, built-in cabinets were installed in the dining room, or why there are chicken coups in the backyard, the answers to those types of questions can create more harm than good.
Remember, the goal for buyers is to purchase a home of their choosing at the most favorable price and conditions available. That is best accomplished by keeping buyers and sellers apart and letting your agents negotiate in good faith, sharing information as necessary, to ensure all parties remain level headed throughout the transaction.
Dustin Brohm | SearchSaltLake.com | Salt Lake, UT
When asked to contribute to this article, my first thought was the obvious stuff; don't go buy a new car, don't change jobs or alter your pay structure, don't open any new credit lines, etc. But even though those are all VERY important points, I'm going to go a different direction.
When buying a home, never keep your wants, needs, concerns, and/or questions to yourself! You hired a Realtor for a reason... for their help and expertise to navigate the somewhat stressful and tumultuous (wow, that must be the biggest word I know!) buying process.
Especially when you first start looking at homes and visiting them in person. It's crucial that you don't filter what you really think about them. How is your Realtor supposed to eliminate the crappy homes if he or she doesn't know what you dislike about the ones you've already seen? Your Realtor is not a mind reader! Trust me, if they were a mind reader, they'd be making billions in the stock market and probably wouldn't be showing you homes on a Saturday afternoon. I tell all my clients from day one... I'm more interested in what they don't like about a home than what they do like. I don't want to keep showing them a bunch of crappers; but I need their honest feedback to do that.
The same goes for questions you have. If you keep them to yourself, your Realtor can't educate and help you understand. There are many moving parts during a home purchase, so make sure you ask all your questions as they come to you. I assure you, you will enjoy the process much more, and have much less stress, if you are comfortable and are not confused about what is going on. Coming from a place of knowledge and understanding will not only help you enjoy buying a home more, but you'll also have a leg up on your buyer competition who maybe are not as well informed and educated.
Dustin Brohm is a top Salt Lake City Realtor, Snapchat & social media marketing master, smart home expert, entrepreneur & Founder of SearchSaltLake.com. He also hosts a local web show, Salt Lake Insider. Dustin is an expert on using the newest technology to have the most effective real estate marketing possible for his clients.
Luke Skar | MadisonMortgageGuys.com | Wisconsin, IL
Getting approved for a mortgage loan is a major achievement for most people. This type of accomplishment would naturally be a reason for celebration. However, there are ways to accidentally unapproved your mortgage.
First, DO NOT go out and finance the purchase of an automobile. While the mortgage approval may give you the impression that you are financially invincible and ready to take on more responsibility, the new car loan could void your mortgage approval. A new loan will impact your debt to income ratio and could cause your lender to turn down your mortgage application.
Second, DO NOT get a new credit card or a new specific store charge account. Like the previous item, new credit can have a negative impact on your debt to income ratio.
Third, DO NOT close out any old credit accounts. If you have an old credit card that you have not used in the past couple of years, it may seem like a good idea to close out the account. However, closing the account could lower your credit score. The drop in score might be slight but could be enough to either put you in a different qualifying bracket or eliminate your approval altogether.
It is also worth noting that you should consult with your lender before putting an offer on a home. Based on your mortgage pre-approval, certain properties could disqualify your mortgage. This would be terrible news to hear after you had your heart set on a specific home.
David O'Doherty | SearchClaytonNCRealEstate.com | Clayton, NC
Don't Forget To Pay All your Credit Cards When You're Buying A House.
You applied for a mortgage and the loan officer informed you that you were pre approved for a mortgage of X amount. The approval is normally based on a number of factors, employment history, income, debt to income ratio, credit history that combined gives the green light to your mortgage application.
At this early stage you are pre-approved, you still have to get qualified and that process is more detailed and will require documentation, pay stubs, tax returns etc. During this process which can last for over a month, or longer if you can’t find the right house if anything changes with regards to the loan it could derail the whole process and your ability to get a mortgage.
For example, credit scores and credit history are important factors that mortgage brokers consider when approving you for a loan. Depending on the loan you are getting the bank has a minimum credit score they will accept, fall below that and that pre-approval goes away.
Something as simple as missing one payment on one credit card could take your credit score down by a huge amount enough to cause you to lose the house you were going to buy. It doesn’t matter what the amount is either, you could be late on a $20 payment and it could crush your credit score. It can take months and a lot of work to get back to pre approval status, so keep a close eye on all your monthly bills when applying for a mortgage.
Paul Sian | CincinKyRealEstate.com | Cincinnati, OH
What Not To Do When Buying A Home
Buying a home is a serious commitment of your financial resources over as long as a 30 year period of time. As a result, mortgage lenders are required to carefully scrutinize your financial situation as part of the mortgage application process. This process of looking over your finances is an ongoing process that in fact extends to even before you apply for a mortgage. As a result, home buyers should be considering their personal finances at least 6-12 months prior to applying for a mortgage pre-approval letter.
After applying for a mortgage pre-approval and during the home shopping process, buyers should be even more vigilant over their spending and borrowing activities. During this time and right up until closing on a home purchase, the mortgage lender will look at recent bank statements, W-2 forms, tax returns, pay stubs, credit reports and more. Therefore if at all possible you should refrain from making large purchases with credit or cash, even if the purchase is with cash in your bank account.
The cash in your bank account is looked at in order to determine your whole financial picture. That cash could also be considered as part of or all of the money to pay towards a down payment if you are required to make a down payment towards a home. Even if you will be able to put that cash back in your bank account before closing that may not be good enough for a lender who has strict requirements on keeping track of your financials in order to approve you for a loan. As a result, your best bet is to wait on any large purchases until after you buy your home.
Paul Sian is a licensed Realtor in the states of Ohio and Kentucky with over 12 years of experience. You
can find more blog posts from Paul at http://www.cincinkyrealestate.com/blog
Angela Duong | MADHomesUtah.com | Tremonton, UT
When looking to buy a home, the first thing you should do is start the mortgage process to know what you qualify for. Then of course comes the searching for the home. Once you have found the home of your dreams, there is still much more to the home buying process. So many things can happen in that 30-45 days it takes to close on the home. Some of which may ruin your plans to buy. You would not want a bad buying experience, especially if you are a first-time home buyer. Here are a few of the things to avoid while purchasing a home.
1. Do not go buying any vehicles. One of my fellow Realtors had a couple ready to buy a home. The day of signing the paperwork the husband showed up in a new truck. Unfortunately, that was a big mistake. It took them over on their debt to income ratio. They were unable to buy the home.
2. Do not make a career change. When you are in the middle of your home purchase, it is not advisable to change jobs. There have been home buyers that thought it was safe to change jobs. Heck, they even asked the lender if it would affect anything. However, somewhere down the line, it ruined their chances of qualifying for the loan. This too can affect your debt to income ratio, or the years you have been at current workplace.
3. Do not charge up the credit card to furnish your soon-to-be new home. Another story from a fellow Realtor was that a newlywed couple were in the process of buying a new home and decided to charge $12,000 on a credit card to furnish the new place. That really hit the debt to income ratio hard.
Try to avoid using any credit, while in the buying process. Even a small charge could take you over the edge of qualifying for a home. Furnish your home after you know it’s officially yours. (Of course, paying cash is always best!)
Angela Duong is a Realtor® in Northern Utah working with home buyers and sellers of Tremonton Real Estate & Brigham City Real Estate, along with the surrounding areas.
DJ Morris | SpringbokRealty.com | Jupiter, FL
Countless things can go wrong when buying a new home, from the time of signing a contract all the way to and past the closing. It is so easy to get wrapped up in the essential steps of escrow, getting insurance for your new home, applying for a loan, providing all the documents for your loan approval, etc. It is easy to overlook the simple things that can also become costly. Being a Realtor for fifteen years and investing in rental properties, I have made my share of mistakes as a buyer, from paying too much in a seller’s market to forgetting to release escrow in time.
One of the worst mistakes I had made myself was caught before it cost me a lot of money, it was also made by my real estate attorney when he bought a new home through our company. Being in the industry, we should both know better. As mundane as it might seem, the mistake was not switching the utilities over before closing, especially the water. You might think that switching the water over is not a big deal, but the three things that can damage a home in an instant are fire, wind, and water!
In my case, I bought a rental property that needed painting and I forgot to switch the water over before closing. The painters, who need water to clean up, showed up and turned the kitchen faucet on only to find out that there was no water. Well, their instinct was to call me without making sure that the faucet was turned back to the off position. I immediately called the water department and a within a few hours the water was turned back on. However, the painters had left and luckily returned a few hours later to find the kitchens tile floor flooded, but luckily it did not have time to reach the wood floors in the living room.
My real estate attorney ran into a more severe problem with not turning on the water before closing. My attorney paid $645,000 for a new home and the day of closing, he and his wife and four children showed up to the house. While the couple walked around downstairs making notes of where to put furniture, the kids ran from bathroom to bathroom upstairs turning on each faucet only to get none of them to work. After leaving the property, the kids told their dad there was no water, so he called the water department on the way back to their home that was on the market but had not sold yet. Upon the families return to the property two days later they opened the front door only to see several inches of water with the ceiling drywall soaked and partially caved in.
After filing a homeowner’s insurance claim, the total damage from not turning on the water in time was $65,000 to replace the damaged drywall and wood floors.
DJ Morris owns Springbok Realty in Jupiter, Florida, a boutique real estate company that specializes in luxury homes in the surrounding areas which also include golf course communities, on the waterfront, and condos.
Kyle Hiscock | RochesterRealEstateBlog.com | Rochester, NY
Ryan, thanks for reaching out to me to get some of my advice of things NOT to do when buying a home! When buying a home, there are many moving parts and steps in the process. One wrong move can derail buying a home. Below are two of the most important things NOT to do when buying a home!
Without a doubt, one of the biggest things NOT to do when buying a home is skipping the home inspection. There are many reasons to have a home inspection when buying a home. A home inspection is a great way to learn about a home and find out if there are any many issues with the home. Owning a home comes with expenses and some homes will have more expenses than others. Skipping a home inspection and finding out at a later date is a surefire way to be shelling out boatloads of money in the future to correct issues that may have been discovered during an inspection.
Another important thing NOT to do when buying a home is skipping the pre-approval process. When you buy a home, the majority of real estate agents are going to ask for a pre-approval. Real estate agents ask for pre-approvals for a variety of reasons, all which are good. One of the biggest reasons why a real estate agent asks for a pre-approval is because they want to eliminate the risk of falling in love with a home only to find out you don’t have the ability to buy it.
Kyle Hiscock, one of the top real estate agents in Rochester NY with Nothnagle Realtors, has helped hundreds of buyers and sellers move in, out, and around Rochester since 2011! Kyle actively writes helpful content on his popular, Rochester’s Real Estate Blog.
Chris and Karen Highland | FrederickRealEstateOnline.com | Frederick, MD
There are a number of things buyers may do that put their home purchase in jeopardy, as many of these bloggers have pointed out. All along the home buying journey there are pitfalls that buyers need to be aware of. But, before you even start the process, paying close attention to your credit report and credit score can save you from heartache down the road. Here's a story to illustrate:
Three years ago our first-time buyers were in a contract to purchase a home in November. They were anxious to get into a home before the new year, so as soon as their credit scores were above the minimum 640, they were on the trail. Fingers crossed and with best wishes, hopes and prayers, they found the perfect townhouse, made an offer and it was accepted. Happy Day!
Mid-November they got the call from their lender...they had an old collection bubble up and hit the wife's credit score, docking her 20 points, knocking them out of qualification for the loan program they were using. Oh, Unhappy Day!
As the Thanksgiving and Christmas holidays were approaching, the sellers decided to take their home off the market and try again in the New Year. So we scrambled, got in touch with our amazing credit counselor, Blair Warner, of Upgrade My Credit. He got to work for them and did his magic...and between Thanksgiving and Christmas, her score was up 35 points. We were over the moon. The sellers agreed to get back into contract, rather than go through the process again. Oh Happy Day!!
Two lessons learned from this experience that our buyers are happy to pass on:
1. Before you get started in the home buying process, it's a good idea to get your scores a significant number higher than the minimums. Blair Warner advises a good cushion of 30 to 40 points above, so that if there are any surprises or credit dings, they won't bump you out of qualification.
2. We advise people who are thinking about making a major purchase of any kind to KNOW their credit report. You need to be aware of what's in there, aware of your history and know what, if anything might creep up and catch you up. Having knowledge is the first step to making a plan. With our buyers, the collection was only for $300 for a 2 year old medical bill. It doesn't take much to do real damage.
3. If you are thinking about buying a home someday, take special care of your credit. If you need a little help, don't be shy about reaching out to a financial advisor or a credit specialist. That investment could save you years of pain that may come from an unwise financial move.
Chris and Karen Highland are a husband and wife team in central Maryland. The Highland group with eXp Realty. Between them, Chris and Karen always have something to say about buying and selling real estate and about what's going on in the industry. You can catch them at Frederick Real Estate Online and at @365frederick on twitter.
Brad Officer | OfficerGroup.com | Jacksonville, FL
DON’T Buy At the Top of the Neighborhood!
As a primarily listing focused Realtor, I’ve always taken a different look at the home buying process. I’m looking at it from the resale side from the very beginning. As I’m listing homes, I routinely run into situations where the current homeowners have purchased a home at the “top” of the neighborhood.
Buying at the top of the neighborhood is when a home buyer chooses the absolute largest home and often a home with all the bells and whistles within a specific neighborhood. While this is a very attractive home, it may not always be the wisest choice.
The market for the largest home or the top priced home in a neighborhood is vastly different than the market for a middle of the road home in that same neighborhood. A top of the market home has to attract a lower priced buyer to move their price up, while a middle of the market home will attract BOTH the upper market and the lower market. A MUCH larger opportunity for resale!
If you are shopping for a home and find yourself at the top of the market within the neighborhood, it’s time to reevaluate your long term plans or maybe you should consider a higher end neighborhood.
Ryan Fitzgerald | RaleighRealtyHomes.com | Raleigh, NC
Whether you are early on in the home buying process, or under contract on a house, be careful of changing jobs!
Recently, a client of mine was pre-approved for a loan through BB&T and mentioned to them he would be changing jobs. BB&T told him no problem, the loan would be fine. My client, a sales executive, opted for a higher paying job so all should be ok, right? Wrong.
The gig my client took was a smaller base salary, and a higher commission structure. This means that the bank saw the higher paying job as him taking a pay cut. It wasn't until a few days after the loan should have funded that we learned it would not be approved.
Luckily, we now have a great lender (switched away from BB&T) who was able to give this loan a chance (set to close end of July) and it will be interesting to see what happens!
There are a lot of reasons you don't want to switch jobs when buying a house. The main reason being the institution that is lending you money is less confident in lending money to someone who is not in a stable position. Those who are starting their own business will have a tough time buying a house.
When I bought my house in Raleigh, I had just started Raleigh Realty.
The banks took a look at my base salary ($0), and my history of commissions ($0), and my length of employment at my new venture and laughed. There was no way they were going to approve me. A few months before I was pre-approved to buy a home up to $450,000 on my Boston salary. That is how drastic the change can be when you're switching jobs.
It took a cosigner to make it happen in my scenario. That's something you can use as well.
Basically, if you're planning to buy a home wait a few weeks before switching your job. If not, you need to be absolutely positive that the bank knows every detail of what you are doing, how you are doing, and what you will be making.
Hi there! I'm Ryan Fitzgerald, a REALTOR in Raleigh-Durham, NC and the owner of Raleigh Realty. Chances are you and I share a similar passion, Real Estate! I also have a passion for technology, sports, and people. Would love to hear from you. Drop me a note in the comments section below and feel free to share this article socially!