Don't Trip Yourself up While Buying your New Home

What's more fun than buying a bunch of new furniture to adorn your future home? Nothing. But making big purchases before your loan closes could be trouble. There still remain a few major hurdles to jump before closing. Below you'll find a list of things to avoid during this critical time of your home purchase.

Don't overspend on big-ticket items You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new dream home, but stay away from big purchases like furniture, cars, appliances, or vacations until the loan closes. Your lender may send up red flags if you buy new electronics on your credit cards in the middle of your loan process. Using cash to buy big-ticket items can even be an issue: many lenders take into consideration your available cash when approving your loan.

Don't go on a career search. Consistency in your job history is a positive thing to lending institutions. Finding a new job (especially one with a bigger paycheck) may not jeopardize your ability to qualify for a loan. However, if you switch careers before your loan is approved, your mortgage process could fail or be bogged down.

Don't switch banks or move cash around in your bank accounts. Bank statements from the last few months for all of your accounts (savings, checking, money market, and others) will be reviewed as the lender makes decisions regarding your approval. To avoid fraud, lenders want to see clear documentation of how you earn your money and where any additional money comes from. Even for practical reasons, transferring cash or changing banks could make it difficult for the lending institution to verify your bank history.

Don't give a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your earnest money does not belong to the seller: it is actually yours until closing. A FSBO seller might not know that the good faith funds should go toward your expenses upon closing. You'll want to put the funds into a trust account, or get an attorney to hold them until the deal closes. The disposition of earnest funds, if your sale falls through, should be specified in the contract with your seller.

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

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