What to Avoid During a Home Purchase
What's better than buying a bunch of new furniture to adorn your future home? Not much. But making large purchases before closing can be a misstep. It's wise to remember that until closing, your lender is watching your finances very closely. Below you'll find a list of actions to stay away from during this critical time of your home purchase.
Don't buy big-ticket items. Although you may be listing ways to turn your new home into a showplace, try to stay away from big ticket purchases like appliances, electronics, or furniture. We also recommend that you stay away from vacations and car purchases until your loan closes. Financing new stainless steel appliances with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. Using cash to buy big items can even be a bad idea: many banks consider your available cash when approving your application.
Don't go on a job search. Stability in your job history is a positive thing to lending institutions. Finding a new job (particularly one with a bigger paycheck) may not change your ability to qualify for a mortgage loan. But for some, changing careers during the mortgage loan application process could raise concern and stymie your application.
Don't switch banks or move finances around in your accounts. Your lender will ask for recent bank statements for your accounts: savings, checking, money market, and other assets. To detect potential fraud, most loans need thorough paperwork to verify the source of all cash. No matter the reason, changing banks or moving money from one account to another can raise a red flag with the lender and impede your loan process.
Don't hand over earnest money directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your good faith deposit belongs to you, not to the seller up until the deal closes. The earnest money is to be applied to your expenses closing; some individual sellers may not know this. A neutral party, like an attorney can hold your earnest money, or you may put it temporarily into a trust account until you close. The contract should dictate who gets the earnest funds if the transaction does not go through.
Back Bay Funding can answer questions about these "Don'ts" and many others. Call us at (888) 299-4585.