What to Avoid During your Home Purchase
Some new homebuyers make the mistake of rushing out to buy new things for their home soon after the seller accepts their offer and the loan is approved. It's wise to remember that until closing, your lender is watching your accounts very closely. We have given you a list of actions below you will want to stay away from when waiting for closing.
Don't make expensive purchases. Although you will be listing 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. Your lender may send up red flags if you purchase new furniture on your credit cards during your loan process. Using cash to purchase big items can also be a bad idea: many banks consider your cash reserve when approving your mortgage loan.
Don't go on a job search. Stability in your work history is a positive thing to banks and other lenders. Finding a new job (especially one with a bigger paycheck) may not change your ability to qualify for a mortgage loan. However, if you switch careers before you qualify, your process could fail or be stalled.
Don't move money around or switch banks. While the lending institution reviews your mortgage loan package, you will likely be required to provide bank statements for the last two or three months for your checking accounts, savings accounts, money market funds and other liquid finances. To avoid fraud, lenders look for clear documentation of how you earn your living and where any additional wealth comes from. No matter the purpose, moving banks or transferring money may raise a red flag with your lender and slow your application process.
Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. Your earnest money does not belong to the seller: it remains yours until the transaction is final. Although your seller might not realize this, the good faith money should go toward your closing expenses. Get an attorney or other neutral person who is able to hang on to the money or put it in a trust account until closing. The final disposition of good faith funds, if your sale fails, should be specified in the purchase agreement with the seller.