Five homebuying mistakes that can cost you a home

What mistakes derail first-time buyers before they buy?

Many hopeful first-time buyers get derailed by the same handful of mistakes, often without realizing it until a lender pulls their credit. Most come down to one thing: protecting payment history.

1. Buying a "deal" on a used luxury car

A high-end car at half its original price can look tempting. Without a warranty, though, maintenance can be expensive and a major repair can run into the thousands. If the owner cannot afford the repair and gives the car back, that is not a turn-in. It is a repossession, which can show up on the credit report.

The fix: buy reliable and affordable, and save the dream car for after closing.

2. Letting a totaled car damage credit

When a car is totaled, insurance can take two to six months to pay off the loan, and the borrower is generally still responsible for payments in the meantime. Stopping payments while the claim is open can stack up 30-, 60- and 90-day late payments, which can seriously hurt the chances of a mortgage.

The fix: keep paying while the claim is open, even if it turns out nothing was owed in the end.

3. Ignoring student loans

Federal student loans in bad standing can block a government-backed mortgage, which rules out many of the best first-time buyer programs. The same can apply when forgiveness was approved and then reversed.

The fix: look into income-driven repayment, which can be as low as $0 a month depending on the situation, or get back into deferment. Either way, stop the late payments. This is usually fixable once it is addressed.

4. Co-signing before you buy

Co-signing a child's student loan or a sibling's car note means that payment usually counts fully in the co-signer's own debt-to-income ratio, as if the debt were entirely theirs. If they pay late, that late payment can show up on the co-signer's credit too. This often catches older buyers who co-signed for family.

The fix: close on your own home before signing for anyone else.

5. Falling for debt settlement companies

With debt settlement, the usual first step is to stop paying bills, which damages credit with late payments and collections. The company then negotiates balances down and takes a sizable cut.

The fix: talk to a credit specialist or lender first. There are often better options that do not damage credit for years.

Bonus: timing matters with new credit cards

A new card can help in the long run, since after a few on-time payments it starts building positive history. But for someone buying in the next 90 days, a new account can temporarily lower the score. Builders and lenders may also check credit more than once before closing.

The fix: talk to the lender before opening anything new.

And the honest part

This is general education, not credit, legal or financial advice and not a commitment to lend. How any of these situations affects a mortgage depends on the loan program, the lender and the full credit file. Federal student loan repayment options change over time; check current options with your loan servicer, and your mortgage options with a licensed mortgage professional.