21 Dos and Don’ts When Buying a Home

You’re excited to buy your first house. It is one of the biggest decisions you will ever make, and you want everything to go just right. You’re nervous — but at the same time — you’re already imagining yourself kicking back on your wraparound deck with an ice-cold beverage, showing off your new place to friends and family. Buying a home is a huge accomplishment and a goal for many Americans — In fact, 65.4% of Americans are homeowners as of April 2022. Are you ready to dive in?

Homebuying is not all mahogany window treatments and refrigerator shopping, however. There are many steps along the way to homeownership, and it can get quite bumpy. There are a lot of pieces that need to come together, multiple parties involved, and important deadlines to meet during the process.

We asked our top agents for their best advice for first-time buyers and we’re going to delve into the top dos and don’ts when buying a home; some may be odd, others may be more obvious, and several you may have never considered.

Dos when buying a home

There are many crucial steps that you should take when you’re buying a home, and we’re going to dive into eleven of them:

1. Know your credit score and legal standing

It is important to check all three of your credit scores from Transunion, Experian, and Equifax regularly to keep tabs on your credit standing. You also want to check your FICO score, as this is what the majority of lenders use; you can often get your FICO score for free if your banking institution provides it, but otherwise you might have to pay for this service.

You will want to know where you stand so you can get ahead of any potential issues and create a plan for improvement before applying for a mortgage. For example, it may be worth strategically paying down some of your debt or disputing any errors on your credit report before purchasing a home.

Your mortgage lender will check your credit score, as well as analyze your credit history. They will look at factors like outstanding credit card balances, missed payments, age of credit history, and any accounts that are in collections, to name a few. You will likely need to explain to your lender any accounts that are delinquent and any hard inquiries on your credit report.

Typically, the higher your credit score is, the more likely you will be approved for a mortgage — and the lower your interest rate will be.

Make sure to resolve any legal issues you may have as well, if you can. Your lender may require that you’re up to date on child support payments, don’t owe back income taxes, and aren’t currently involved in any lawsuit or litigation. You will need to disclose to your lender if you are currently party to a lawsuit, and if you are, they will require an explanation.

Lenders will also want to know if you’ve ever declared bankruptcy or owned a house that went into foreclosure. These events may not necessarily prevent you from buying a house, but there may be a time limit required from the time the event happened until you can purchase a home with a mortgage.

2. Line up financing

So you want to buy a house, but how are you going to pay for it? It’s important to line up financing well in advance of when you want to start making offers.

Getting preapproved for your mortgage will help you understand exactly what you can afford, and speed up the process once you find a home. Be sure to do your research to find a reputable lender who can guide you through financing your first home purchase.

When shopping for lenders, compare first-time home buyer programs, lender requirements, interest rates, and loan terms to make sure you are getting a good deal. Be sure to also compare closing costs such as application fees, appraisal fees, and origination fees.

3. Submit your documents promptly

Once you choose a lender and start the preapproval process, your lender will request documentation for all of your debts (liabilities), income, and assets to get your full financial picture. Also during this stage, your lender will pull your credit report after getting your consent.

Be prompt with their document requests so the process goes as smoothly (and quickly) as possible. Usually, the quicker you can get your lender what they need, the quicker you can close!

The lender will typically ask for the following at a minimum:

• Identification: Driver’s license or state ID and social security card
• Bank statements
• Pay stubs
• Tax returns for the last two years
• W-2s or 1099s
• Transaction details: the purchase agreement and a copy of your earnest money deposit

4. Work with an agent

Real estate agents are professionals who know their local housing market, its conditions, and the homebuying process as a whole. Choosing the right agent is a big decision and you will want to find one that represents buyers and/or sellers in the neighborhood you want to purchase a home in.

Negotiations can be tricky for first-time buyers, but real estate agents (some of the best negotiators you will ever meet) should do all of the heavy lifting when it comes to advocating for you and your needs during this process.

A knowledgeable agent will be able to provide information that you may not have already known. For instance, MaryAnn Spearman, who works with 69% more single-family homes than the average agent in the Clearwater, Florida area, advises her buyers to check out city, state, and even national grants that they could use toward purchasing their first home.

5. Research different neighborhoods

Don’t get stuck on a specific ZIP code or cul-de-sac. Be open minded and check out multiple different neighborhoods, as you may be surprised at how much you like the ‘feel’ of a neighborhood that you would’ve otherwise overlooked.

Attending open houses in different areas is a great way to get a feel for the street, check out different styles of houses, and maybe even meet some potential new neighbors. Do remember to sign in while you’re there and ask the listing agent a lot of questions, if you can.

Drive around a few different neighborhoods during the daytime and at night to see what’s going on, how the traffic is, and if there are nearby amenities. Also, it could help to walk around the neighborhoods if you can, because you get a totally different vantage point when you’re on foot rather than in the car.

This is a great way to assess the walkability of a particular place if that is important to you. Check out local coffee shops, restaurants, book stores, and grocery stores. Talk to people and ask how they like the area, and see if you can picture yourself living there.

6. Focus on the home’s potential

Most homebuyers have a house-hunting checklist of characteristics they want to see in their potential home, and that’s totally fine, but sticking to a rigid list of must-haves might make it more difficult to find a home. Try, instead, to focus more on the home’s potential rather than its existing attributes.

For example, if a home has good ‘bones’ and a big backyard, it may be worth considering, even if the kitchen is outdated and you don’t love the paint colors. Focus on what the house could become with a little work, rather than how it is right now. With that being said, there are some things that are difficult to change such as the layout, number of bathrooms, and lot size.

7. Maintain your financial standing and consider the future

Maintaining your financial standing during the closing process may be the difference between closing on your dream home and losing the deal. You’ll want to avoid closing your accounts, opening new accounts, and changing jobs during this time to keep closing on track.

You also want to consider the future when buying a home. Think about potential appreciation over time, as well as how you are going to budget for maintenance (or replacement over time) of the expensive stuff, including the roof, appliances, and HVAC systems.

Also, think of the future in another way —  who will be living in the house over the next few years? If you plan on having children, ensure the house gives you enough space to grow and for rambunctious toddlers to run around.

8. Get a property inspection

It’s always recommended to get a home inspection. This is performed by a licensed property inspector who thoroughly assesses the house and writes a report of major problems that need to be fixed immediately, issues that need to be fixed eventually, and systems that are working properly. A property inspector will examine the roof, plumbing system, HVAC system, and more.

Even in a competitive housing market, where buyers are waiving inspection contingencies, it’s always a good idea to get an inspection so you know what exactly is wrong with the house before you take ownership.

9. Shop around for homeowners insurance

Homeowners insurance is always required if you’re financing the house with a mortgage, but even if you pay cash, it is still strongly recommended. Shopping around and comparing companies and premiums can save you money both up front and later on if a disaster occurs.

When looking at policies, keep in mind risks that might be specific to your area such as flooding, wildfires, earthquakes, or tornadoes. Ask for discounts if you bundle your policies, have an alarm system, or if the property you are buying has a new roof.

Some lenders may require wind mitigation and four point inspections before you get an insurance policy, but your real estate agent or mortgage lender will be able to recommend an inspector who can complete these.

10. Be mindful of your privacy and security

People often think about protecting their identity when it comes to using their credit card or shopping online, but it’s also important to be mindful of your security when buying a house. Research the mortgage company and title company before giving them any personal information, such as your Social Security number, bank account information, and any other sensitive documents.

Wire fraud is especially common in real estate transactions, so always wait for wiring instructions from the title company and call and confirm them before sending money. It is extremely rare for wiring instructions to change at the last minute, so if you receive new wiring instructions via email, call both your lender and escrow officer to verify.

11. Pay attention to the Loan Estimate and Closing Disclosure

It’s always important to read everything you sign, but this is especially true when buying a house and hundreds of thousands of dollars, or more, are involved. You will receive a Loan Estimate within three business days of applying for a loan. This will be eventually followed by a Closing Disclosure which is provided three business days before closing and contains a more final breakdown of your closing costs. It should also include the terms of the loan and your projected monthly mortgage payments.

Review both of these disclosures with a fine-tooth comb to make sure they are accurate and the terms are what you reviewed with your lender. Make sure you compare your Loan Estimate and Closing Disclosure to look for any major changes such as an increase in fees or a change to the monthly mortgage payment.

There are limits to the amount that certain fees can increase during the time between the Loan Estimate and the Closing Disclosure. Bring any concerns you have to your lender as soon as possible so they have time to correct any mistakes before you sign final loan documents.

Don’ts when buying a home

Just as there are must-dos when purchasing a home, there are also some definite don’ts!

1. Don’t start looking at houses before you’re preapproved

Looking at homes out of your budget may be inspirational for some, but most people will constantly compare these homes to what they can actually afford, and this can lead to unrealistic expectations and disappointments down the road.

Make sure that you get preapproved for a mortgage before you start house-hunting so you can avoid falling in love with that amazing fully restored colonial home that’s listed at a whopping $2 million dollars — when you’re really only preapproved to purchase a home for $700,000.

2. Don’t shop at the very top of your preapproval range

Just because you’re preapproved to purchase a $500,000 home, it doesn’t mean you need to spend that much, or even that you should spend that much. Remember that your preapproval usually contains the maximum amount of home you can afford, and it does not account for the cost of any improvements you might want to make after you move in.

It’s wise to be a bit more conservative when house-hunting within your budget, and consider looking at homes on the lower end, if you can. This could help you avoid becoming “house poor” and help you save for necessary maintenance — or whatever life may throw your way.

3.  Don’t wait until you save up 20%

Contrary to popular belief, it’s not always necessary to wait until you have saved 20% for your down payment to consider shopping for a home. Some loan programs, such as those backed by the FHA, allow for a down payment as small as 3.5% and may allow for some first-time buyers to receive down payment assistance for some or all of their down payment.

VA loans for veterans, service members, and some surviving spouses offer 0% down to qualified borrowers, so this might be a great option if you belong in that category and want to finance all of your home purchase. You might, however, be required to pay a VA funding fee, so it is always worth comparing your options with a knowledgeable loan officer to determine what makes the most sense.

Additionally, you may qualify for a conventional loan with as little as 3% down. Conventional loans for borrowers who put less than 20% down will require mortgage insurance, either in the form of a monthly payment added to the mortgage payment or a lump sum paid at closing (sometimes both!). While this added expense is not ideal, it could be worth considering if it means you can become a homeowner sooner than you thought.

4. Don’t get too emotionally invested

It’s easy to get emotionally invested when making a large purchase, especially knowing that your new home will be where you and your family are going to rest your heads every night. However, the homebuying process can be quite complicated for most people, and you won’t get every home you set your heart on.

Remaining flexible during the process and taking your time to consider all of your options will help you avoid buyer’s remorse and keep your spirits high. Don’t get so caught up in the process that you don’t enjoy it or make a rash decision that you might regret later.

5. Don’t forget to do your research

Listing descriptions are often misleading. A “completely renovated waterfront home” may actually be a house across from a creek that was remodeled years ago. Always do your research online, look at photos and videos, and tour the house in person. Your real estate agent can also help you here to determine if a home will meet your needs.

The same goes for a mortgage calculator — don’t completely trust it to tell you whether you can afford the home. Mortgage calculators can be a helpful tool, but not all are created equal, and some may not include all of the components of your monthly housing payment — such as your principal, interest, property taxes, HOA dues, and homeowners insurance.

6. Don’t ignore the appreciation potential of the property

Although you can’t know exactly (without a crystal ball) how well a property will appreciate, you can always look to how its value has changed over the last few years for clues. Consider what other houses are selling for by looking at the comparable sales in your area.

Other factors might influence property values in the future such as new employers coming to the area and what kinds of businesses are opening and/or closing in the near future.

The more affordable house on the nicest block is often a better purchase than the most expensive home in a neighborhood, as you might have more potential for increasing your home’s value with strategic upgrades and remodeling projects.

7. Don’t make any financial changes before settlement

Kimberly Hoobler, who sells more townhomes than the average agent in Enterprise, Alabama, reminds buyers not to make any financial changes before going to the closing table. A new trade line could alter your debt-to-income ratio and throw off the whole deal if you are not careful. Wait on making any large purchases until after closing, including cars, jewelry, boats, furniture, and appliances.

You also don’t want to deposit large amounts into your bank accounts without being able to explain and document exactly where they came from with a solid letter of explanation. Try your best to leave everything the same as it was when you got preapproved, unless your lender advises you otherwise.

8. Don’t fear negotiating with the seller post inspections

In some cases, it might be beneficial to negotiate with the seller after you get the home inspection report back if the inspector uncovered anything concerning. Prioritize any major concerns (like health and safety issues) over cosmetic problems.

If you’re working with a real estate agent, you can sit down together and decide how to proceed and how much negotiating you want to do. It’s common to ask for a discounted sale price or to have repairs made by a licensed professional prior to closing. You might also be able to negotiate for the seller to cover some closing costs in exchange for keeping the sale price as-is.

9. Don’t forget about closing costs

Most homebuyers should expect to spend anywhere between 2% and 5% of the purchase price on closing costs alone. Shopping around for a mortgage lender and title company could help you save on these fees, but you should always have more saved than you think you will need.

It’s a welcome surprise to not spend as much as you thought you would, but planning ahead can help you avoid the nightmare that is realizing at the last minute that you are short on funds to close.

10. Don’t make any career changes

You may have always wanted to take time off to travel, cut back your working hours, or venture out on your own, but now is not the time! Don’t make any career changes during the closing process — if you suddenly quit your job, or make less money, you may no longer qualify for a loan.

Your mortgage lender will likely complete one last verification of employment just before closing happens, and if they find that you no longer work there or the conditions of your employment have changed, they might pull the plug.

Last word

Now that you know the important dos and don’ts when buying a home, remember to be patient when you’re going through the process. That scrumptious, buttery-soft, cognac-colored, Italian leather sofa may be calling your name, but wait until after closing to make any major purchases or open any new lines of credit.

Work with a reputable mortgage lender and real estate agent to know what’s going on each step of the way and avoid the mistakes that may stop you from landing in your new home.

Header Image Source: (Des O’Connell / Unsplash)