What to Avoid During a Home Purchase
With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of carrying their enthusiasm straight to the mall or furniture store. It's wise to remember that until you get the keys, your lender is watching you very closely. Here are some things to avoid before closing to be sure the transaction goes smoothly.
Don't buy luxury items. Although you will be listing ways to turn your new house into a castle, avoid major purchases like appliances, electronics, or furniture. You will also want to avoid vacations and car purchases until your loan closes. Using credit cards to buy new living room furniture could jeopardize your lending process by changing your numbers dramatically. It's also a red flag to make those huge purchases using cash. Lenders are looking at your available cash when considering your loan.
Don't look for a new career. Your recent job history should show stability. Finding a new job (especially one with a better paycheck) may not affect your ability to qualify for your loan. However, if you switch careers before your loan is approved, your mortgage process could fail or be stalled.
Don't move cash around or change banks. While the lending institution reviews your mortgage application, you will probably be instructed to submit bank statements for the last two or three months for your saving and checking accounts, money market accounts and other liquid wealth. To eliminate potential fraud, most lending institutions need a detailed paper trail to determine the source of all funds. Even for practical reasons, transferring funds or changing banks could make it more difficult for your lender to verify your account history.
Don't give cash directly to your seller (generally in the case of of "for sale by owner") to be used as earnest money. Your earnest money does not belong to the seller: it remains yours until the sale closes. Your seller may not know that your good faith money must be applied to your expenses at closing. A neutral party, like an attorney can hold your deposit, or you may put it temporarily into a trust account until closing. Should your home purchase fail, the contract with the seller should dictate to whom this earnest money should go.
Back Bay Funding can answer questions about these "Don'ts" and many others. Give us a call at (888) 299-4585.