I added a user with no home dir thinking when they logged on they wouldnt be able to see or do anything, I was wrong.

So I used

usermod -d /new/dir/here username
Now when logging in using that username I get

/usr/bin/xauth:  timeout in locking authority file /new/dir/here/.Xauthority
How can I correct this?

Also how do I restrict that user to that folder only?

Easiest way, I think, is to delete the user and start again but Id like to know how to fix it.

I checked in the /etc/passwd and it shows the home dir for the user to be what I set it at.