Don't Trip Yourself up While Buying a New Home
Many new homebuyers make the mistake of rushing out to buy new things for their home soon after the seller accepts their offer and the loan is approved. Until your loan closes, there are still some hoops to jump through. We have listed some things below we suggest you avoid when waiting for closing.
Don't buy luxury items. You may be itching to turn your new living room into a home magazine cover, or celebrate your new dream home, but stay away from expensive purchases like furniture, jewelry, appliances, or vacations until the loan closes. Using plastic to buy furniture could compromise your loan process by altering your numbers dramatically. Using cash to buy big-ticket items can also create a bad idea: most lending institutions take into consideration your cash reserve when approving your mortgage.
Don't look for a new job. Lenders feel comfortable seeing a consistent work history on your paperwork. Getting a new job may not affect your ability to qualify for a mortgage loan - particularly if you are getting a better salary. However, if you switch careers before approval, your loan process could fail or be slowed down.
Don't move cash around or change banks. Your lender will require you to provide recent bank statements on all of your accounts: checking, savings, money market, and other assets. In order to avoid fraud, lenders look for clear documentation of how you earn your money and where any additional money comes from. Even for innocent purposes, moving around cash or switching banks may make it difficult for your lender to document your bank history.
Don't give cash directly to your seller (commonly in the case of of "for sale by owner") to be considered earnest money. As a rule, your earnest money is yours, not the seller's until the deal closes. Your earnest money is to go toward your expenses closing; some individual sellers might not know this. Get a lawyer or other neutral party who is able to hang on to the money or place it in a trust account until closing. The disposition of earnest funds, in the case of a failed transaction, should be included in the purchase agreement with your seller.
Back Bay Funding can walk you through the pitfalls of getting a mortgage. Give us a call: (800) 299-0270.