Don’ts When Buying a Home
1. Choose the Wrong Mortgage: With the advent of instant refinancing, home
loans are no longer the lifetime obligations they used to be. Still, you don't
want to be saddled for even a short period of time with the wrong one. Investigate
all your options, then lay your choices side-by-side and do the math, making
sure to compare worst-case scenarios. Be sure to look at initial interest rates,
future interest rates and payments (if different), and the possibility of prepayment
2. Confuse "Pre-Approved" and "Pre-Qualified" with a Loan
Commitment: These are debatable terms in real estate because not all lenders
apply the same definition to each expression. In fact, one leading real estate
dictionary contains neither expression because their definitions are uncertain.
According to one school of thought, however, when you are "pre-qualified,"
the lender is making an educated guess about how much you can borrow based on
information you've provided. When you are "pre-approved," the lender
has verified everything you have told him or her and is offering to lend you
up to a given amount at current interest rates -- under certain conditions.
Whether pre-qualified or pre-approved, final clearance and a check at closing
-- a loan commitment -- are subject to an appraisal satisfactory to the lender,
good title, a last-minute credit check, and other verifications. When meeting
with lenders, always ask how they define each term and what additional steps
will be required to obtain a loan.
3. Have Too Much Credit: Excessive credit is almost as bad as no credit or even
bad credit. Even if you pay your bills on time, lenders tend to focus just as
much on how much credit you have available to you as they do on timeliness.
So being up to your ears in car loans and credit cards is a sure way to be turned
down for a mortgage. Postpone any big ticket purchases until after you buy your
4. Lie on Your Loan Application: Exaggerating your income on a mortgage application
or putting down other untruths can be a federal offense. Lenders rarely prosecute
liars. But if they find out later, they can call your loan due and payable.
Don't ever sign your name to a loan application that is not completely filled
out, either. Loan officers have been known to stretch the truth to get a client
approved, but it's the borrower who ends up paying the price, often in the form
of monthly loan payments he can't afford.
5. Hide If You Can't Make Your Payments: The worst thing you can do is ignore
phone calls and letters from your lender when you are behind on your payments.
Lenders have many options at their disposal to help keep borrowers from losing
their homes to foreclosure. But they can't do anything for you unless they can
talk to you about your difficulties. Lenders are the enemy only if you give
them no other choice.
6. Skip a Home Inspection: Failing to make your purchase contingent on a satisfactory
home inspection could be a costly mistake. Independent home inspectors examine
houses from stem to stern. They'll be able to tell you whether the roof and/or
basement leaks, whether the mechanical systems are in good shape and how long
the appliances should last. They can't report on things they can't see, but
at least their trained eyes are better than yours. So don't pass just to save
$300-$400; that's money well spent.
7. Hire Just Any Agent to Sell Your House: All real estate agents are not the
same. You want to look for those who specialize in your neighborhood and are
top producers. Ask your candidates how they plan to market your house, what
you can do to make the place more attractive to prospects and how much you should
ask. If you don't like any of the answers, looks elsewhere. And above all, stay
away from relatives. Unless Aunt Bessie or Nephew Nick fit the description above,
8. Fail to Check Out a Remodeler: Never, ever hire a contractor who knocks on
your door or says his prices are good for only a few days. Reputable remodelers
don't solicit door-to-door, and they don't cut prices just because they happen
to be in your neighborhood. Check out a potential contractor thoroughly by calling
several of his past clients, your local better business bureau, his bankers
and suppliers, and your local consumer affairs agency.