In today’s ultra-competitive housing market, buyers need to be strategic to get the home they want.

Luckily, there are some simple best practices you can follow when house hunting and applying for a mortgage that will put you on the road to success. 

If you know what to expect — and how to avoid common home buying mistakes — you can give yourself the best possible shot at scoring the home you want. Here’s what to do. 

Mistakes can cost you when buying a house

When you’re preparing to get a mortgage and buy a new home, it’s important to clean up your personal finances and present yourself as a strong borrowing candidate. 

However, that doesn’t just mean saving up cash for a down payment and closing costs. 

It also means avoiding common financial mistakes that can reduce your borrowing power, or even, in a worst-case scenario, get you denied for a mortgage. 

Buying a home entails a lot of different activities going on at the same time. There are house condition issues, mortgage financing issues, contract negotiation issues, and appraisal issues that can all cause problems, distract you, and lead to errors in judgment if you are not careful. Not to mention, buying a house, is one of the most expensive transaction a person will engage in during their lifetime

7 Things you should never do before buying a house

Here are some of the most common mistakes first-time home buyers make, why they matter, and how to avoid them. 

1. Don’t finance a car or another big item before buying

One of the most common and the biggest mistake buyers can make is to finance a car just before applying for a mortgage loan.

Equally troublesome is when buyers wish to go out and purchase new furniture and appliances on credit before their new mortgage closes. And it’s not just your FICO score that’s at risk. 

Taking out a loan on a car or financing a big-ticket item like a boat, wedding, or vacation can increase your debt- to- income ratio,  making you look like a less attractive borrower to a lender.

2. Don’t max out credit card debt

Maxing out a credit card is one of the worst things you can do before closing on a home loan.

The extra debt payment amount will offset your income and result in you qualifying for less mortgage financing, It will also lower your credit score, which could increase the cost of your loan.

For the best mortgage rate — and in the interest of keeping debt levels down — try to keep your credit utilization below 30% of your total credit limit. 

For instance, if your credit card allows up to $3,000, try to maintain a balance below $900. And pay the card off in full every month, if you can. 

This will improve your credit score, reduce your debts, and help you qualify for the best possible home loan. 

3. Don’t quit your job or change careers before buying

Demonstrating consistent employment is essential when applying and getting approved for a mortgage loan.

Job changes can create lending issues, especially if your pay structure changes from salary to commissions, as this necessitates a longer track record of earnings — typically two years when it comes to commissions.

A good rule of thumb= Aim for a consistent employment history of two years or more, at the same employer or at least in the same line of work.

4. Don’t assume you need 20% down

Many first-time buyers assume they need a 20 percent down payment to buy a house. But while having 20 percent down comes with perks — like avoiding private mortgage insurance (PMI) — it’s not always the best option. 

Waiting until you have 20 percent down can push your home buying timeline out by years. And the longer you wait to buy, the higher home prices you’ll be chasing — which likely means you’ll need an even bigger down payment. 

Luckily, there are several loan programs available today that require little to no down payment. These include:

Typically, you need to pay mortgage insurance if you put less than 20 percent down. But the good news is that mortgage insurance companies today charge more affordable monthly premiums than they did years ago for borrowers with good credit.

5. Don’t shop for houses without getting preapproved

Before you go house hunting, it’s crucial to get a mortgage pre-approval. Otherwise, you could be setting yourself up for disappointment.

If a prospective buyer finds a house they love and afterward tries to get preapproved for a loan, the home may be gone before they finish getting preapproved. In addition, many sellers want to show their home to serious buyers only and will request a preapproval letter from the buyer.

There’s another compelling reason to get pre-approved early in the process is because you need to know how much house you can afford.

The preapproval process involves applying with a lender who will check your income, credit history, and assets. Only after verifying these documents can a lender approve you for a home loan and tell you your real price range.

6. Don’t go with the first mortgage lender you talk to

You’re excited to claim a home, and you want to speed up the process. So you apply with one mortgage lender and move forward as soon as you’ve been approved. 

The experts agree: That’s a big mistake.

Although many lenders’ rates are very close in price to others, some lenders charge rates that are above average. Getting a bad loan with a higher interest rate can be very expensive in the long run, so be sure to shop around and get quotes in writing from several different mortgage lenders.

So, when you’re getting quotes, try checking with a few different types of lenders. Check rates at your current bank, but also look at online mortgage lenders, credit unions, and maybe even a mortgage broker. 

7. Don’t make any big financial changes before closing

Once you have a signed purchase agreement and you’re approved for a home loan, you’ll go through the final stages of underwriting. 

This is mostly a waiting game while the lender re-checks your financials and issues final approval. But don’t be lulled into thinking it’s a done deal. Nothing is official until you’ve signed the final closing papers. 

The last thing you want to do while waiting for final loan approval is to make major financial changes, such as: 

  • Purchasing a car
  • Significantly increasing your credit card balance
  • Opening up new credit cards
  • Changing careers
  • Applying for new loans or lines of credit 

Best practices when buying a house

To improve your odds of getting mortgage-approved and qualifying for a lower interest rate, be financially prudent in the weeks and months before you apply for a home loan.

Here are the three best practices to follow before buying a home: 

  • First, do not close any active credit accounts. Keep any active revolving accounts open
  • Next, do not apply for or open any new credit accounts
  • Additionally, strive to pay down your credit balances to 30% of your credit limit or less

Of course, you’ll want to save up as much cash as possible. 

Remember that your down payment isn’t the only upfront home buying expense. You’ll also have to pay closing costs, which typically equal 2-5% of the loan amount (or $2,000 to $5,000 for every $100,000 borrowed). 

You should keep track of any large deposits to your bank accounts, too. If you make any deposits into your checking or savings accounts that are not payroll deposits, be prepared to document where they came from.

As long as you avoid these mistakes during the home buying process — and keep your finances in the best shape possible — you should be on the right track to homeownership.