Things to Avoid While Purchasing a New Home

What's more fun than getting a bunch of new furniture to adorn your future home? Nothing. But making large purchases before your loan closes could be trouble. Keep in mind that until your keys are in hand, your lender is watching you very closely. Below you'll find a list of actions to stay away from during this critical time of your home purchase.

Don't throw your money around. Although you may be dreaming of ways to turn your new house into a castle, avoid big ticket purchases like appliances, electronics, or expensive furnishings. We also recommend that you avoid vacations and car purchases until your loan closes. Financing your Plasma TVs with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. Because lenders are looking closely at your bank accounts, a large cash purchase is also a bad idea.

Don't look for a new job. Your recent work history should show consistency. Getting a new job before you apply for a mortgage loan may not get in the way of your approval at all. However, if you switch careers before you qualify, your loan process could fail or be stalled.

Don't move cash around or change banks. Bank statements from the last few months for accounts in your name (savings, checking, money market, and other assets) will likely be analyzed as the lending institution makes decisions regarding your application. To eliminate fraud, lenders will need clear documentation of how you earn your living and where any additional funds come from. No matter the purpose, changing banks or moving funds from one account to another may raise a red flag with the lender and slow down your approval process.

Don't give funds directly to your seller (generally in the case of of "for sale by owner") for earnest money. As a rule, your earnest money is yours, not the seller's until the deal closes. A FSBO seller might not realize that any good faith funds should go toward your expenses at closing. Find a lawyer or other neutral party who can hang on to the money or place it in a trust account until you close. The purchase agreement should document who gets the earnest funds if the transaction does not go through.

The Reen Team at American Pacific Mortgage can walk you through the pitfalls of getting a mortgage. Call us at (408) 626-1879.

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