These are "MUST DO NOT" things before buying (or even looking) for a home.

No Major Purchase of Any Kind:

When you get a raise or accumulate some savings, you may find yourself confronted by an innate instinct of modern civilized men and women.  It begins simply, by going out to restaurants, then accelerates to buying clothing, electronic gadgets, and since most Americans have a special fondness for the automobile, you may even buy a "brand new car."

If you're married or ambitious, a few months later your thoughts eventually turn toward buying your own home, or a move-up home, if you are already a homeowner.  Next, you contact a loan officer to get prequalified for a mortgage loan. You state your desired price and how much you can put down. You provide your income and may even supply pay stubs and W2 forms. The loan officer methodically crunches the numbers (by telephone, in person, or even over the internet).  "If only you didn't have this car payment…"

Don’t Move Money Around:

When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs.  Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets.  This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.  The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits.  You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

Perhaps you become exasperated at your lender, but they are only doing their job correctly.  To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds.  Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

So leave your money where it is until you talk to a loan officer.  Oh…don’t change banks, either.

Should You Change Jobs?:

For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money.  For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.

 
Think ahead.  If you're even beginning to think about a new (or move up) home this year, talk to a real estate broker first.  They can properly advise you as to how ANY purchase now, could affect your ability to get that new home you want, later.

Some mortgages come with a provision that penalizes you for paying off the loan balance faster.  Such penalties can amount to as much as several percentage points of the amount of the mortgage balance that is paid off early.

Some lenders won't enforce their loan's prepayment penalties when you pay off a mortgage early because you sold the property or because you want to refinance the loan to take advantage of lower interest rates as long as they get to make the new mortgage. Even so, your hands are tied financially unless you go through the same lender.

Many states place limits on the duration and amount of prepayment penalty lenders may charge for mortgages made on owner-occupied residential property.  The only way to know whether a loan has a prepayment penalty is to ask and to carefully review the federal truth-in-lending disclosure and the promissory note the mortgage lender provides you with. We think that you should avoid such loans. (Many so-called no points loans have prepayment penalties.)

In South Carolina, the law does not allow mortgage lenders to charge a pre-payment penalty.

For the most part, lenders’ application fees are reasonable.  But some lenders have been getting creative with fees, warned attorney Howard Newman.  Some lenders will entice borrowers with a low application fee.  They later make up for this by charging “junk fees” that show up somewhere else as part of the closing costs.

Closing costs are fees and charges tacked on to the mortgage over and beyond the interest rate being quoted.  They usually run between 6 and 8 percent of the mortgage amount being borrowed.  Closing costs include attorney fees, title insurance and points.   One point is equal to 1 percent of the mortgage amount borrowed and must be paid upfront at the closing.  Only with FHA loans can points be financed along with the rest of the mortgage.

Learn more about Lender Junk Fees….

If you have enough money to pay cash for your home, you can happily thumb your nose at bankers and other mortgage lenders. If you can afford to pay cash for your home, who needs them?!

As for the rest us, we need to take out a mortgage to buy a home for the simple reason that doing so is the only way we can afford a home that meets our needs. This chapter helps all non-wealthy folk to comprehend mortgages and then choose one. (If you are wealthy and have a great deal of money to put into a property, this part of the book can also help you to decide how much of your loot to put into your home purchase.)

Start with the basics. What is a mortgage? A mortgage is nothing more than a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home that you're buying. Homes in your area may cost $70,000, $170,000, or $370,000. No matter — most people don't have that kind of spare cash in their piggy banks.

Mortgages typically require monthly payments to repay your debt. The mortgage payments are comprised of interest, which is what the lender charges for use of the money you borrowed, and principal, which is repayment of the original amount borrowed.

Learning how to select a mortgage to meet your needs ensures that you'll be a happy homeowner for years to come.

Learn more about mortgages….

If you want a house with character - perhaps even a history of its own - consider an older home.

Middle-aged houses often reflect the love and care that have been lavished on them through such owner-added touches as crown moldings, carved fireplace mantels and built-in bookcases.

Often older homes are also found in neighborhoods that present a more varied environment using a broader range of architectural styles, as well as a range of colors and texture of materials.  Mature trees, established lawns and years of gardening often add much to the feel of a community.

With older homes, however, come older floor plans that may not fit into today's lifestyles.  Traffic flow may not be convenient, master bedrooms may be small, closets almost nonexistent, and kitchens and baths outdated.

If you think remodeling costs will make the house the most expensive home in the neighborhood, keep looking or you may lose money in he long run. Your repair bills will most likely be higher  at least in the beginning years of ownership.  And remember that old homes are unpredictable - you never know when the roof, furnace or water heater will need replacing.