Don't Do These Things Before Buying a House
Buying a new house is a thrilling step, and one that can be potentially overwhelming. There are a few things you'll want to avoid doing before you buy a house because they can add stress to the experience, or make it harder or more expensive. Avoiding these key mistakes will help you ensure you're approved for a loan, and will help you get the most house for your money.
Don't buy a car. Actually, don't buy anything that requires you to take out any debt. This includes furniture or lawn maintenance equipment for your new house. Taking on new debt messes with your debt-to-income ratio and that affects how much money banks are willing to lend you, if any. Taking on more debt just before buying a house may result in you not being able to buy it at all.
Don't move your money between your accounts. While this won't necessarily prevent you from getting approved for a mortgage, it will create more work for you. A mortgage lender will ask for your bank records going back up to three months, and will want to see receipts or records for any major withdrawals or purchases- even if it's just you withdrawing money from one account and depositing it in another. Make your life easier and leave large sums of money where they are.
Don't treat your preapproval maximum lightly. Your bank will preapprove you for a loan that makes sense based on your income and existing debt. That doesn't mean the preapproved loan is what you can afford comfortably. Just because the bank lent you x amount doesn't mean you have to buy x amount of house. Buying less will ensure you still have room for your existing lifestyle.
Don't be pressured into buying a house just because the market is right. It might be a buyer's market at the time you're considering buying a house, but if it's not right for you financially, don't push it. There will always be houses out there, no matter what the market climate is. Purchase a house because it's right for you, not because the news tells you that now is the right time.
Don't fall behind on your existing payments right before you try to get a loan for a mortgage. If you are behind on your other bills, your credit score will drop and a mortgage lender will have to loan you less, give you a higher interest rate, or refuse you altogether. Stay current on all your bills for at least twelve months before you start applying for loans.
Don't rush it. Buying a house is a major lifestyle change, and is probably the biggest purchase you'll ever make. Don't make the decision based on emotion ('I'm so tired of this landlord!') or because you're 'supposed' to be a homeowner. If you do, you'll end up with a major time and money investment that you never wanted.