Things to Avoid While Purchasing a New Home
With the thrill that comes with an accepted offer and a "yes" from the lender, many homebuyers make the mistake of taking their enthusiasm straight to the mall or appliance store. Until your keys are in hand, there are still some hurdles to jump. Here are some things to avoid before closing to assure the transaction goes well.
Don't buy luxury items. Although you will be planning ways to turn your new home into a castle, try to stay away from major purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and vehicle purchases until your loan closes. Your lender may send up red flags if you purchase new electronics on your credit cards during your loan process. Since lending institutions are reviewing your bank accounts, a large cash purchase is also not advised.
Don't get a new career. Lending Institutions feel comfortable seeing a consistent career history on your application. Changing jobs may not affect your ability to qualify for a loan - particularly if you are improving your salary. However, if you switch careers before your loan is approved, your process could fail or be stalled.
Don't change banks or move finances around in your accounts. Bank statements from recent months for accounts in your name (checking, savings, money market, and other assets) will likely be reviewed as the lender considers your loan application. To avoid potential fraud, most lending institutions require a detailed paper trail to verify the source of all cash. No matter the reason, moving banks or moving money from one account to another can raise a red flag with the lender and slow down your approval process.
Don't give funds directly to your seller (usually in the case of of "for sale by owner") for a "good faith" deposit. Your good faith money does not belong to the seller: it is actually yours until the transaction is final. Your earnest funds are to be used for your expenses upon closing; some sellers might not realize this. An attorney or other type of neutral party can hold onto your deposit, or you may put it temporarily into a trust account until you close. The disposition of good faith money, if your transaction falls through, should be specified in the contract with your seller.
At Channel Mortgage LLC, we answer questions about this process every day. Call us at (718) 639-9500.