What to Avoid During a Home Purchase
Many new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller says "yes" and the loan is approved. There are still a few major hurdles to jump before your loan closes. Here are some actions to stay clear of before closing to assure your transaction goes well.
Don't buy big-ticket items. Although you may be planning ways to turn your new house into a castle, avoid major purchases like appliances, electronics, or expensive furnishings. You will also want to avoid vacations and car purchases until the closing of your loan. Your lender may send up red flags if you buy your electronics on your credit cards in the middle of your loan process. Using cash to buy expensive items can also be a mistake: most lenders take into consideration your available cash when approving your mortgage loan.
Don't look for a new career. Stability in your career history is a good thing to lending institutions. Changing jobs may not compromise your ability to qualify for a mortgage loan - especially if you are improving your salary. But in some cases, getting a new career during the loan application process may raise concern and stymie your application.
Don't move cash around or switch banks. Bank statements from recent months for accounts in your name (savings, checking, money market, and other assets) will likely be reviewed as the lending institution makes decisions regarding your loan application. Your lender needs to see a steady rise and fall of your money each pay period, in the interest of ruling out fraud. Even for innocent reasons, moving around cash or switching banks might make it more difficult for your lender to verify your bank history.
Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. Your good faith deposit does not belong to the seller: it is actually yours until the sale closes. Your earnest funds are to be used for your expenses upon closing; some sellers might not understand this. You'll want to put the funds into a trust account, or get an attorney to hold them until the deal closes. Should your home purchase fail, the purchase agreement should document where this good faith funds should go.
At Mason Mortgage Advisors, we answer questions about this process every day. Call us: 314-395-8300.
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