Things to Avoid While Buying a New Home
What's more fun than getting a bunch of new furnishings to adorn your future home? Not much. But making big ticket purchases before closing can be a misstep. There are still a few major hurdles to jump before your loan closes. Below you'll find a list of actions to avoid during this crucial time of your home purchase.
Don't buy big-ticket items. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new castle, but stay away from major purchases like furniture, cars, appliances, or vacations until the loan closes. Your lender may send up red flags if you purchase your furniture on your credit cards during your loan process. Using cash to purchase big-ticket items can even be a mistake: most banks take into consideration your cash reserve when approving your loan.
Don't get a new job. Your recent work history should show stability. Getting a new career before you apply for a mortgage loan may not compromise your approval at all. But in some cases, changing careers during the mortgage application process might raise concern and hinder your application.
Don't take your accounts to a new bank or move around your finances. While the lending institution reviews your mortgage application, you will probably be instructed to submit bank statements for the last two or three months for your checking accounts, savings accounts, money market accounts and other liquid finances. To eliminate fraud, lenders want to see a consistent portrayal of how you earn your money and where additional funds come from. Changing banks or moving finances elsewhere - even if its only to pool funds - may make it harder for the lender to review your funds.
Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. Until the completion of the deal, any good faith deposit remains yours. Your earnest money is to go toward your expenses upon closing; some sellers might not know this. It's best to put the funds into a trust account, or get an attorney to hold them until the deal closes. The final disposition of good faith money, if your transaction falls through, should be specified in the purchase agreement with your seller.