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Home > Buying Real Estate in New Hampshire > Things to Avoid When Buying a Home

Things to Avoid When Buying a HomeEveryone likes to have nice things and have comfortable lives. So it's easy to find yourself spending a little more if you get a promotion, eliminate the last of your student loans or finally pay off your car.

At first it starts off innocently enough. You might go out to eat a little more, you might buy some nicer clothes or you might have had your eye on a new car.

Buy resist these temptations if you're planning on becoming a homeowner soon. Or if you're already a homeowner, if you're planning on upgrading.

This article is meant to illustrate a couple of common mistakes people make just before they look into buying a home. While it's geared toward new home buyers the more experienced will find some useful points as well.

Keep Your Wallet Close

Try to avoid making big purchases at least six months prior to purchasing a home. If you're like most Americans, you're not going to buy your home outright with a cash transaction. Instead you'll shop around and apply for a home loan that you can afford. Like a car you'll have to pay interest on the loan.

There are two main factors that determine what you'll end up paying monthly for your mortgage. The first is your credit score. If you have a significant amount of debt on your credit cards or a large car or personal loan you'll naturally have smaller score than if you did not.

The second is your down payment. The bank sees a down payment as sort of a good faith move on your part. It shows them that you can be trusted. The average expected down payment for a home is between 15% - 20%. The less you spend leading up to a home sale, the more you have available for as down payment. Which means lower monthly payments or a more better home.

Trust in Your Advisors

Your advisors (mortgage broker, real estate agent, appraiser, etc.) are there to guide you through the process of making what will likely be one of the biggest transactions of your life. You should trust those you choose to represent you. You may feel uncomfortable divulging certain pieces of information. These can include:

Your advisors will likely have seen it all. They can't help you if you're concealing information or omitting what might be important details. Resist the temptation to conceal or play up information. It can only hurt you in the long run.

Don't Fiddle with Your Money

When your mortgage officer reviews your loan application, one of the things they look for is the source of your down payment. You will likely be asked to provide pay stubs and documentation of your assets. This usually includes checking and savings accounts, mutual funds, bonds and certificates of deposit. Maybe even a recent statement regarding your 401k at work.

Avoid transferring too much money from one account to another. To do their job properly a mortgage officer will need to document all sources of funds needed for a down payment. If you have too many withdrawals, transfers and deposits your loan officer may take significantly longer to process your application. Changing banks just before your move can make things difficult, too.

Your Job: Your Biggest Asset

When you borrow money your income is examined to see whether or not you can pay back your home loan. A responsible lender will want to be comfortable with your employment before proceeding past the application process.

While it's generally okay to change jobs shortly before filing for a loan there are some things to keep an eye on.

If you are salaried or an hourly full time employee you should not have an issue obtaining a loan so long as you have sufficient funds for a down payment and your credit isn't too poor. So long as your new job is within the same general industry and your pay does not increase too much you should not have an issue switching.

However, if a large portion of your income comes from commission or bonuses avoid changing jobs before purchasing a home. This is also true with those who are employed part time. If you have one of the aforementioned occupations your lender will average your past two years of income in order to see what you can afford. If you change employers you will not have this to rely on.

Similarly if you're self employed you will need a two year track record. Small business owners usually have the gumption and responsibility to pay off their loans, but to the lender you're at a higher risk of defaulting simply because you don't have the cushion a larger employer can provide. Furthermore, start ups often have a lot of expenses within the first year or two of operation. Avoid becoming self employed until after your purchase and you're sure you'll still be able to afford your mortgage payments.

Undocumented income (under the table) will not qualify as income.

Remember, your mortgage lender isn't just looking out for the interest of their bank or credit union. A good lender will be looking for your best interests, too. So if your lender says you cannot afford a loan as large as you'd like take their advice seriously. The last thing your bank or credit union wants is you defaulting.