What to Avoid During your Home Purchase

What's more fun than getting a bunch of new furnishings to go in your future home? Not much. But making large purchases before your loan closes could be trouble. Keep in mind that until you get the keys, your lender is watching you very closely. Below you'll find a list of things to stay away from during this crucial time of your home purchase.

Don't buy big-ticket items. Although you will be planning ways to turn your new house into a castle, avoid big ticket purchases like appliances, electronics, or expensive furnishings. We also recommend that you keep away from vacations and vehicle purchases until the closing of your loan. Using credit cards to buy new living room furniture could compromise your lending process by changing your numbers dramatically. Because lending institutions are looking closely at your bank accounts, a large cash purchase is also not advised.

Don't get a new job. Stability in your work history is a good thing to banks and other lenders. Finding a new job (especially one with a bump in salary) may not change your ability to qualify for your mortgage. However, finding a new career in the middle of the loan process may influence whether or not you are approved.

Don't switch your accounts to a new bank or move around your cash. While the lender reviews your mortgage application, you will probably be instructed to produce bank statements for recent months on your checking accounts, savings accounts, money market accounts and other liquid finances. To avoid potential fraud, most lending institutions want a detailed paper trail to verify the source of all cash. Switching banks or moving finances to another account - even if its just to consolidate funds - might hinder the review of your funds.

Don't give funds directly to your seller (commonly in cases of "for sale by owner") for a "good faith" deposit. Until the sale is complete, the good faith deposit remains yours. A FSBO seller may not realize that any earnest money must be used for your expenses at closing. Find a lawyer or other neutral party who can hang on to the money or place it in a trust account until closing. Should your sale fall through, the contract with the seller should indicate to whom the good faith deposit should go.

Real Property Finance can walk you through the pitfalls of getting a mortgage. Call us: 310-379-5997.

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