What to Avoid During your Home Purchase
What's more fun than getting a bunch of new stuff to adorn your future home? Nothing. But making large purchases before your loan closes could be trouble. There still remain a few major hurdles to jump before your loan closes. Here are some things to stay clear of during the home buying process to assure the transaction goes well.
Don't buy big-ticket items. You may be tempted to buy that new sofa for the soon-to-be-yours den, but it's best to stay away from making large buys like furniture, appliances, electronic equipment, or vacations until your home loan closes. Your credit numbers could change suddenly if you purchase new furniture using credit cards. Using cash to purchase expensive items can even create an issue: most lenders look at your available cash when approving your application.
Don't look for a new job. Consistency in your work history is a good thing to banks and other lenders. Getting a new job may not compromise your ability to qualify for a loan - especially if you are going to be making more money. But in some cases, changing jobs during the mortgage application process may raise concern and hinder your approval.
Don't switch your accounts to a new bank or move around your money. Bank statements from the last few months for all of your accounts (checking, savings, money market, and others) will likely be studied as the lending institution makes decisions regarding your mortgage application. Your lender is looking for a consistent rise and fall of your funds each pay period, in order to rule out fraud. No matter the purpose, switching banks or moving money from one account to another could raise a red flag with your lender and slow your loan process.
Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. Until the completion of the deal, the good faith deposit remains yours. Any earnest money is to be used for your expenses upon closing; some sellers might not understand this. We recommend that you put the money into a trust account, or get an attorney to hold it until the closing of the sale. The disposition of earnest money, in the case of a failed transaction, should be indicated in the purchase agreement with your seller.
At Back Bay Funding, we answer questions about this process every day. Call us at (800) 299-0270.