Things to Avoid While Buying a Home
What's better than buying a bunch of new furnishings to adorn your future home? Nothing. But making big purchases before your loan closes can be a mistake. There are still a few major hurdles to jump before your loan closes. 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 planning ways to turn your new house into a showplace, avoid big ticket purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and car purchases until the closing of your loan. Using credit cards to buy new living room furniture could jeopardize your lending process by changing your numbers dramatically. Using cash to purchase big-ticket items can also be a bad idea: most lenders consider your cash reserve when approving your mortgage loan.
Don't go on a job search. Your recent career history should show consistency. Finding a new job (especially one with a bump in salary) may not jeopardize your ability to qualify for your loan. However, if you switch careers before approval, your loan process could fail or be stalled.
Don't switch banks or move finances around in your bank accounts. Your lender will ask for recent bank statements on your accounts: savings, checking, money market, and other assets. To avoid potential fraud, most lending institutions need a detailed paper trail to verify the source of all cash. Even for practical purposes, transferring money or switching banks might make it more difficult for the lending institution to confirm your account history.
Don't give earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your earnest money does not belong to the seller: it remains yours until the sale closes. Although some FSBO sellers might not understand this, your earnest money must go toward the buyer's closing expenses. Get a lawyer or other neutral person who can hold the deposit or place it in a trust account until you close. Your purchase agreement should specify where the deposit goes if the home purchase fails.
The Reen Team at American Pacific Mortgage can answer questions about these "Don'ts" and many others. Call us at (408) 626-1879.