What to Avoid During a Home Purchase
What's better than buying a bunch of new furnishings to adorn your future home? Nothing. But buying big ticket items before closing can be a mistake. It's best to remember that until your keys are in hand, your lender is watching your accounts very closely. We have given you a list of actions below we suggest you avoid when waiting for your loan to close.
Don't buy big-ticket items. Although you will be planning ways to turn your new house into a showplace, try to stay away from major purchases like appliances, electronics, or furniture. You will also want to keep away from vacations and vehicle purchases until your loan closes. Using credit cards to buy new living room furniture could compromise your lending process by altering your numbers dramatically. Using cash to purchase big-ticket items can even create a mistake: most lenders take into consideration your available cash when approving your mortgage.
Don't get a new job. Stability in your job history is a good thing to lenders. Finding a new career (especially one with a bigger salary) may not hinder your ability to qualify for a mortgage. But for some people, changing jobs during the mortgage application process may raise concern and affect your application.
Don't switch banks or move money around in your accounts. Bank statements from the last two or three months for your accounts (savings, checking, money market, and other assets) will likely be studied as the lending institution considers your approval. The lender is looking for a consistent rise and fall of your funds over the month, in order to avoid fraud. Even for practical purposes, moving around finances or changing banks might make it more difficult for your lending institution to verify your bank history.
Don't give funds directly to your seller (usually in the case of of "for sale by owner") to be considered earnest money. As a rule, your good faith deposit belongs to you, not to the seller up until closing. Some sellers might not realize that the good faith money should go toward your expenses at closing. Find a lawyer or other neutral party who will hang on to the funds or put them in a trust account until you close. If your home purchase fails, the contract with the seller should specify to whom the good faith funds should go.
At Real Property Finance, we answer questions about this process every day. Call us at 310-379-5997.
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