What to Avoid During a Home Purchase
Many new homebuyers make the mistake of rushing out to buy things to fill their home soon after the seller says "yes" and the loan is approved. It's best to remember that until your keys are in hand, your lender is watching your accounts very closely. Below you'll find a list of things to stay away from during this crucial time of your home purchase.
Don't make expensive purchases. Although you will be listing ways to turn your new home into a showplace, avoid major purchases like appliances, electronics, or expensive furnishings. You will also want to stay away from vacations and car purchases until the closing of your loan. Financing your Plasma TVs with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Because lending institutions are perusing your bank accounts, a large cash purchase is also not advised.
Don't go on a career search. Your recent job history should show stability. Getting a new job before you start the application process for a mortgage may not affect your approval at all. But for some people, changing careers during the mortgage approval process may raise concern and stymie your approval.
Don't switch your accounts to a new bank or move around your money. As the lender reviews your mortgage loan package, you will probably be required to produce bank statements for recent months on your checking accounts, savings accounts, money market funds and other liquid wealth. To eliminate potential fraud, most lending institutions need a detailed paper trail to verify the source of all cash. No matter the reason, changing banks or transferring funds may raise a red flag with the lender and slow down your loan process.
Don't hand over earnest money directly to the seller in a FSBO (for sale by owner) purchase. Until the completion of the deal, any good faith deposit remains yours. Although some individual sellers might not understand this, the good faith money should be applied to the buyer's closing expenses. A neutral party, like an attorney can hang onto your deposit, or you may put it temporarily into a trust account until you close. The purchase contract should document to whom the money goes if the transaction fails.
At Moonstar Mortgage, we answer questions about this process every day. Call us: 847-278-7220.