7 homebuying traps

Real-estate columnist Tom Kelly knows how important credit scores are, but didn't think much about the ramifications when he applied for a new credit card while in the process of applying for a home-equity line of credit. That, plus his wife's closure of a few other accounts, shaved more than 30 points off the couple's credit score.

It was "really bad timing," Kelly said. "The lender for our proposed line of credit basically said, 'What have you guys been doing?' after our application had been filed and the new FICO scores had arrived."

Failing to investigate the neighborhood

"One common mistake is not looking at the property and the neighborhood at various times," said Dick LePre, senior loan consultant for RPM Mortgage in San Francisco and author of the RateWatch newsletter. "Look at it during the day, the late afternoon when kids tend to cluster, at night and on both weekdays and weekends."

This ongoing inspection can reveal good news, bad news or both. You may find your home is on a popular shortcut for commuters or near the gathering place for local kids, but only for a few hours a day.

"Something which you construe as a problem might only happen one day a week or at a certain time of the day," LePre said.

He also recommends quizzing a few neighbors about what they like and don't like, and about which direction the neighborhood seems to be going.

"Find out if there are any 'crazies' on the block," he said. "If there is empty space nearby, ascertain what the zoning is for that empty space. Is the next block over . . . zoned commercial? Do you want a McDonald's as a neighbor?"

Buying when you're not ready

Buying a home is a great way for the average person to build wealth over the long run, but it's not for everyone in all circumstances.

If your finances are uncertain or your job prospects are up in the air, you might want to wait. Renting is also a better option if you're planning to move in a year or two.

Not buying when you are ready

All that said, you shouldn't let fear or uncertainty keep you on the sidelines if you're otherwise ready to buy a home.

Eldred notes in his book that the media have been decrying the high cost of housing and predicting price peaks at least since the 1940s. Although prices have fallen in various cities at various times, the overall trend has been upward.

Eldred recommends being cautious if your market is showing signs of weakening, such as:

• Properties staying on the market longer.
• A widening gap between the costs of owning and the costs of renting.

Even then, don't put off a purchase if you're able to stay put for several years -- long enough to ride out any downswings.

"In five or 10 years, prices will be higher than they are today," Eldred predicted.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated April 28, 2009

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