Most first-time home buyers know not to take out a bunch of new debt, quit their job, or ignore their bill due dates when applying for a mortgage. But several other factors—from all those morning java runs, to a lack of planning, to carrying a high credit card balance—can affect your chances at snagging that house at the best interest rate. Here are four expert tips on what not to do as you start the process:
1. DON’T wait until the last minute to budget or get organized
It’s not about how much house the bank will afford you—it’s about how much house you can afford now and in the future.
“Knowing where homeownership fits into your larger financial plan is important,” says Kathy Cummings, senior vice president of homeownership solutions and affordable housing programs at Bank of America. “Reflect on where your life is headed and what you want to accomplish along the way. This way, when you meet with your mortgage lender, you’re prepared to have a conversation about how much you would like to put towards buying a home.”
Cummings recommends getting your paperwork, like bank statements and tax returns, ahead of time. (And fellow Apartment Therapy writer Chelsea Greenwood Lassman recommends getting a binder to keep all your home-related papers together.)
2. DON’T make that daily latte run
“If you’re seriously thinking about buying your first home in the next year or so, now is the time to add some extra padding to your bank account,” says Abel Carrasco, loan originator with Motto Mortgage Advisors in Saint Petersburg, Florida. “Remember, there’s more than just your down payment amount that goes into a home purchase. You’ll need to pay for home inspections and an appraisal upfront, along with your actual closing costs that get totaled up for your purchase.”
And that’s just in the home buying process—you’ll also need to pay to move and furnish your home, too.
Avoid taking on unexpected debt by looking at your budget and finding small ways to save cash over time. “If you stop for a latte every day on the way to work, that can easily add up to over $1,000-plus over the course of a year,” Carrasco says. Other smart ways to save? Pocket those $5 bills when you come across them or make these three money-saving lists.
3. DON’T ignore your credit score
“While there is no hard-and-fast rule about what credit score you need to buy a house, boosting your credit score before buying a home can help you get a lower interest rate,” Cummings says. The minimum score you’ll need to get the best interest rates? Experts say it’s 760. Knowing what factors, like utilization and credit mix, go into your credit score can help you make a plan to raise it if it’s just so-so.
Some of the best ways to raise your credit score? Keep the balances as low as possible in relation to the limits, Carrasco says, and don’t close credit accounts—keep them open and in good standing with minimal balances.
“Your credit scores are nothing more than your personal payment history profile,” he says. “Accounts that are open and in good standing for years tend to carry a lot of weight for the algorithms that calculate your score.”
4. DON’T wait to begin your research
Common advice for finding a perfect house (or apartment)? Look at a lot of them. Same goes for assembling your real estate team—but that’s often an overlooked piece of advice. Use the time before you’re ready to buy to interview real estate agents, mortgage professionals, attorneys, inspectors.
“Most buyers will ask for a solid referral from a trusted friend or family member, but always look up their reviews,” Carrasco says. He also recommends going local rather than via a call center or limited service firm.