What to Avoid During a Home Purchase
Some new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller accepts their offer and the loan is approved. There are still a few major hurdles to jump before closing. Below you'll find a list of actions to avoid during this crucial time of your home purchase.
Don't buy big-ticket items. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new castle, but stay away from big purchases like furniture, jewelry, appliances, or vacations until the loan closes. Financing new bedroom furniture 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 purchase big items can even be an issue: most lenders consider your available cash when approving your loan.
Don't look for a new career. Your recent career history should show consistency. Finding a new career (particularly one with a bump in salary) may not hinder your ability to qualify for your mortgage loan. But for some, switching jobs during the mortgage approval process might bring concern and stymie your approval.
Don't switch your accounts to a new bank or move around your finances. As your lending institution reviews your mortgage loan package, you will likely be required to provide bank statements for the last two or three months on your saving and checking accounts, money market accounts and other liquid finances. The lending institution hopes to see a consistent rise and fall of your money over the pay period, in order to avoid fraud. Changing banks or moving money elsewhere - even if its just to consolidate funds - might make it harder for your lender to document your funds.
Don't give a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your earnest money is yours, not the seller's up until the deal closes. The earnest money is to go toward your expenses upon closing; some sellers may not realize this. Get a lawyer or other neutral party who will hang on to the funds or place them in a trust account until you close. The final disposition of earnest funds, if your home purchase falls through, should be included in the contract with the seller.
At Channel Mortgage LLC, we answer questions about this process every day. Give us a call: (718) 639-9500.