Don't Trip Yourself up While Buying a Home
What's better than getting a bunch of new furniture to go in your future home? Not much. But making big ticket purchases before your loan closes could be trouble. There still remain a few major hurdles to jump before the keys are handed over. Here are some actions to refrain from during the home buying process to be sure the transaction goes smoothly.
Don't empty your wallet on big-ticket items You may be itching to turn your new kitchen into a showplace, or celebrate your new dream home, but keep away from major purchases like furniture, cars, appliances, or vacations until closing. Financing your furniture with a store card or a bank credit card could jeopardize your credit worthiness during the time it means the most. Because lending institutions are looking closely at your financial accounts, a large cash purchase is also not advised.
Don't go on a career search. Stability in your career history is a positive thing to lenders. Finding a new job (particularly one with a better salary) may not affect your ability to qualify for a loan. However, switching jobs during your application process might affect whether or not you are approved.
Don't switch banks or move money around in your bank accounts. Most lenders will ask for recent bank statements for accounts in your name: checking, savings, money market, and other assets. To detect potential fraud, most lenders want detailed paperwork to verify the source of all funds. No matter the reason, switching banks or transferring money could raise a red flag with the lender and slow down your approval process.
Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. Until closing, the good faith deposit actually belongs to you. Although your FSBO seller may not realize this, any earnest money should be applied to the buyer's closing expenses. We recommend that you put the funds into a trust account, or get an attorney to hold them until the closing of the sale. The contract should document to whom the money goes if the transaction fails.
At Back Bay Funding, we answer questions about this process every day. Call us: (800) 299-0270.