15 Things You Should NOT Do Before Buying a Home

When it comes to buying, agents are always sharing tips on what you should do. Save up money, get a pre-approval, find an agent, and find a home.

Of course, you and I both know it’s not that easy.

In fact, there are actually certain things that you should absolutely NOT do when preparing to buy a home, that I feel so few agents talk about.

What’s crazy is, for some of these, if you do them, they can outright eliminate your ability to even get a mortgage.

Which is why before jumping headfirst into the process, learn the top 15 DON’T’s of buying a home, as knowing these can be the difference between finally becoming a homeowner or staying stuck as a renter.

#1 – DON’T Open Any New Credit Cards

This should go without saying, but prior to buying a home, DON’T open any new credit cards or lines of credit.

There are two main reasons why.

Doing so automatically causes a decline in your credit score, even if they tell you it’s just a soft hit.

And the lower your credit score is, the higher the interest rate and, in some cases, the down payment your mortgage lender may request of you.

Secondly, when opening new lines of credit, you also increase the total amount of debt in your name, which in turn decreases the monthly mortgage amount you’ll be able to qualify for.

This is because lenders use what is called a debt-to-income ratio to calculate how much you can afford. Typically, they like to see at most your debt equal to 36 – 50% of your income.

By choosing to get new credit cards within 6 months to a year of buying your home, you’re only adding to the debt side of that ratio, and thereby directly decreasing your purchasing power. 

#2 – DON’T Max Out Your Credit Cards

Along similar lines, for the credit cards that you have…don’t max them out.

In other words, don’t utilize 100% of your current credit line.

In the world of buying a home, this is a big No-No and can and will be used against you when it comes to qualifying for a mortgage.

Typically, banks and lenders like to see you use only 30% of your total credit lines. For example, if you have $10,000 in total credit made available to you across all five of your credit cards and car payments, they’ll consider you a stellar borrower if you’ve only used $3,000 of it.

If however, a mortgage lender or loan officer pulls your credit and finds that you’re maxxed out on everything, this will negatively impact how much of a monthly mortgage they’ll be able to qualify you for.

#3 – DON’T Ignore Your Credit Score

This should go without saying, but don't ignore your credit score in the lead-up to buying a home.

Credit plays such a large factor for lenders to qualify you, and it's not something you want to let run wild or amok.

Quick story time, I once had a client who managed to win a once-in-a-lifetime opportunity – the 20% CalHFA Dream for All Down Payment Assistance Voucher – back when it was still available to anyone and not just first-generation home buyers.

Unfortunately, though, she was never able to use it because she was not monitoring her credit at all, and her credit fell just a few points below the minimum score required by the program.

Whether it's through Experian or your local online banking website, make sure to monitor your credit score and activity.

#4 – DON’T Quit or Change Jobs or Careers

Single-handedly, the biggest thing you should NOT do prior to buying a home is quitting your job.

Lenders love consistency and stability in terms of your employment and income.

They want to make sure you’re getting regular paychecks, at a stable, consistent amount, from the same employer or at least industry, within the two to three years leading up to you buying a home.

For them, that’s evidence that you can pay your monthly mortgage payments on time.

If, however, you decide to quit your job or switch industries, it makes you look like a higher risk of defaulting on your mortgage, which the bank and lenders absolutely don’t want.

#5 – DON’T Make Large Cash Deposits Without Documentation

When you’re ready to purchase a home, as a requirement, you'll be asked to provide all pages of your most recent bank statements.

Lenders will then take these pages and pore over them like a forensic investigator, looking to flag any transactions, like large cash deposits.

Everything coming in and out of your bank has to have a paper trail – the bank has to have proof of where the cash came from, why you have that cash and whether or not you were planning to use any of that cash towards the purchase of your home.

The inability to explain large cash deposits into your account can potentially delay or eliminate your ability to get qualified for a mortgage altogether.

Even if you can provide a paper trail for why you have a large cash deposit in your account, let’s say from winning the lottery or even from the sale of your previous home, some lenders may even require it to be “seasoned” or sit in your account for a certain period of time before you can even use it.

As a result, please make sure to either avoid large cash transactions or be prepared to heavily document them.  

#6 – DON’T Make Large Purchases

When buying a home, there are certain fees that only you can pay for, even if you get seller credits or closing costs assistance, such as the upfront earnest money deposit, the home inspection report(s), the appraisal fee, and more.

Because you can never know what these fees are until you’re in the middle of escrow, it’s best that you DON’T make large purchases in the 6 months leading up to buying a home.

#7 – DON’T Close Old Credit Accounts

Now this may sound a little bit strange, especially, but shockingly, closing old credit accounts and cards is also a big NO-NO before buying a home.

When you close old or even dormant credit accounts, whether it’s a personal credit card, store card, you name it, not only will your credit score drop dramatically, which can take months to recover from, but also, depending on the size of the account that has closed, your credit utilization will also shoot up.

Credit utilization is a measure of how much of your available credit line you're actually using. So, for example, if you have a total of $10,000 in credit across 5 credit cards, and have bought $2,500 worth of stuff, then your credit utilization is a healthy 25%.

Just below the 30% threshold that lenders usually like to see.

If, however, you choose to close out a $5,000 Kohl’s card that you never used, your credit utilization is going to shoot up to 50%, which is going to have a domino effect of lowering your credit score and making it seem like you’re maxxing out your credit.

Both of which will negatively impact your homebuying abilities.

#8 – DON’T Cosign on Any Loans

If you are planning to buy a house in the future, DON’T co-sign on any loan with family members or friends.

Even if you’re not the one who will be making payments, this will be considered a huge debt burden that you’re taking on, in the eyes of the bank and your lender, and can significantly reduce how much home you’ll be able to afford. 

#9 – DON’T Use Personal Loans for Your Down Payment

This is one of the few cardinal sins that you can commit as a home buyer…taking out a personal loan or cash advance to use as your down payment.

This is a hard no when it comes to buying a home and will automatically disqualify you from being able to buy a home.

If part of you is thinking, “how will they possibly know”…lenders and mortgage officers will again be poring through every single bank account and transaction you have, and they will definitely be able to tell if you’re claiming money you received from a personal loan as the cash you will use towards your home purchase.

#10 – DON’T Fall Behind on Any Personal Loans That You Have

If, for whatever reason, you already have an active personal loan, or, let's say you just recently co-signed on a loan with another, it's imperative that you tell your lender that you have no intention of using any of those funds towards your down payment, and it’s critical that you do not fall behind on any of those payments.

These loans are considered higher risk, as they are unsecured and are often associated with less-than-ideal borrowers in the eyes of banks and lenders.

Obviously, if you already have one, there’s nothing you can do to change that perception, but you can help manage it, by at the very least staying on top of those payments.

#11 – DON’T Rely Only on Sites Like Credit Karma for Your Credit Score

To be clear, I am just a realtor, not a lender, but the advice I often get from loan officers is to tell my clients they should NOT rely on what third-party sites like Credit Karma to know what their true credit score is prior to buying a home.

This is because, it turns out, there are actually two types of scores: a consumer credit score and a mortgage score.

On average, these two scores will be different, as your mortgage credit score will only take into account factors that matter most when taking on a mortgage.

Which is why, even though these sites may be great to monitor your score on a day-to-day basis, it’s best not to rely 100% on what they say your score is.

#12 - DON’T Deduct Your Income to Nothing

This one is specifically for my small business owners and entrepreneurs who don't receive W-2s – DON’T take every deduction for at least 2 – 3 years leading up to the year you decide to finally buy a home.

While taking your deductions is your right, doing so can severely limit your ability to qualify for the home you desire, especially if you decide to maximize those deductions as much as humanly possible.

This is because with Schedule C and other self-employed filers, loan officers are required to calculate your monthly income based on your net income after deductions.

Which means, even if you make $100,000 a year, if your taxes reflect only $12,000 in annual income, your monthly income will reflect just $1,000.

Now, if for whatever reason you would prefer not to give up on taking your tax deductions, there are still specially designed programs out there for you, like bank statement loans and creative financing options like hard money loans.

The tradeoff, though, is that these will usually require a much larger down payment, anywhere from 10% to 20% of the purchase price, which for some may be even more burdensome than paying more in taxes each year.

(***Please note, none of the above is legal or tax advice, and is simply shared for informational purposes.***)

#13 –   DON’T Accept Gift Funds Before Talking to Your Lender

If your family members or friends have mentioned are willing to help you buy a home by contributing money towards your purchase, DON’T make the mistake of accepting those funds before talking to a lender.

When it comes to buying a home, there are certain things that have to be done in order for gift funds from family members to be eligible for use.

It’s not simply a matter of them Zelle-ing you the money, and then you can turn around and use it towards your home purchase.

Gift funds require specific documentation, and trying to skip past these can potentially disqualify their use altogether.

On top of that, not every lender even allows borrowers to receive gift funds from people who are not blood-related to them, which is why it’s best to talk to your loan officer or mortgage lender first to see what your options are to receive help from the people you love.

#14 – DON’T Look At Properties Before You’ve Been Pre-Approved

Now, this is one of my more controversial opinions compared to what other agents out there will say, but you should not be touring properties BEFORE you've gotten pre-approved for a mortgage, and there are several reasons why I say this.

The first is, you don't want to fall in love with the property without having the ability to purchase it. Quite frankly, this will bring you nothing but emotional turmoil that you can easily avoid.

Some people like to tour homes because they want to get a better idea of what they can afford, and often look for information at an open house, like a flyer with the potential mortgage options, to help them decide if buying a home is even worth the effort.

Doing such a thing is also a great disservice.

Many buyers I talk to say they like to tour properties just to know what they can expect, but here’s the thing.

The information you get touring a home on “affordability” is based on general information, not your own unique situation. 

Making it virtually impossible to try to justify your purchase decision.

Additionally, no matter the price of a home, there are always creative options to make it even more affordable for a buyer, through things like seller credits, interest rate buy-downs, down payment and closing costs assistance programs, you name it.

All things that most agents aren’t even aware of, or if they are, aren’t necessarily going to share at an open house.

Which is why I suggest you DON’T tour homes to understand that market and what you can or can’t afford…talk to a lender.

#15 – DON’T Paydown Any Debts BEFORE Talking To Your Lender

Lastly, DON’T pay down any debts before talking to your lender. This may feel a little bit strange, but let me explain.

You, as a buyer, again, only have a certain amount of cash funds available.

How you use these funds has to be prioritized in a way that suits your lender and covers the expenses of buying a home that only you can pay for even if you get assistance from the seller, your agent, or family members.

The last thing you want to do as a buyer is spend all your money before buying a home paying down debts that you really didn’t need to, only to run out of cash mid-escrow and be forced to cancel.

Consult with your mortgage or loan officer before paying anything off or down.

As a realtor in a high-cost market like Southern California, the biggest mistake I see buyers make is failing to apply for or even research all of the down payment and closing cost assistance programs that are out there.

This is such a huge oversight because there are literally tens of thousands of dollars in assistance out there available for you, regardless of whether you are a first-time home buyer or not, and regardless of your income.

Check out my blog here, which outlines the 25 programs in the state.

Even better, not all of them are loans…some are grants that will be forgiven after certain time periods.

Which is why I highly recommend that you don't sleep on the assistance that is out there.

DON'T Skip What to Do Next

You’re now that much closer to successfully buying a home!

We’ve covered the top 15 things you should NOT do before buying a home, all of which are designed to help you maintain a high credit score, lower your overall debt, and avoid doing things that could otherwise disqualify you from getting a mortgage.

The next step is taking everything you’ve learned, seeing where you need help, and creating a plan to make your home-buying dreams a reality.

That’s where I’d love to help – feel free to reach out to me for a FREE consultation (give me

a call at 888-205-3213 or use the link here).