What to Avoid During a Home Purchase
With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of carrying their enthusiasm straight to the mall or furniture store. It's wise to remember that until your keys are in hand, your lender is watching your accounts very closely. Below you'll find a list of things to avoid during this crucial time of your home purchase.
Don't make expensive purchases. 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 closing. Your credit numbers could change suddenly if you purchase new furniture using credit cards. Using cash to purchase big-ticket items can even be a problem: many banks look at your cash reserve when approving your mortgage.
Don't get a new career. Your recent career history should show consistency. Getting a new job before you apply for a mortgage may not affect your approval at all. But for some people, getting a new career during the loan application process may bring concern and hinder your application.
Don't change banks or move money around in your bank accounts. While the lending institution reviews your loan application, you will likely be asked to submit bank statements for the last two or three months for your checking and savings accounts, money market funds and other liquid assets. To detect potential fraud, most lenders need detailed paperwork to determine the source of all cash. Switching banks or moving finances elsewhere - no matter the purpose - might make it harder for the lender to verify your funds.
Don't give money directly to your seller (usually in cases of "for sale by owner") for earnest money. Your good faith deposit does not belong to the seller: it is actually yours until the transaction is final. Some sellers may not realize that any good faith money must be applied to your expenses upon closing. We recommend that you put the funds into a trust account, or get a neutral party, like a lawyer to hold them until the deal closes. Your contract should indicate where the funds go if the home purchase does not go through.
At The Lending Source, we answer questions about this process every day. Call us: (973) 601-2122.