What to Avoid During a Home Purchase
What's better than getting a bunch of new furnishings to go in your future home? Not much. But making large purchases before closing can be harmful. It's best to remember that until closing, your lender is watching your accounts very closely. Here are some things to stay clear of during the home buying process to assure your transaction goes well.
Don't throw your money around. You may be itching to turn your new living room into a showplace, or celebrate your new castle, but keep away from major purchases like furniture, jewelry, appliances, or vacations until closing. You may send up red flags with your lender if you finance new electronics on your credit cards in the middle of your loan process. It's also a bad idea to make those big purchases using cash. Lenders are looking at your available cash when considering your loan.
Don't go on a job search. Consistency in your job history is a positive thing to lenders. Getting a new career before you start the application process for a loan may not affect your approval at all. However, if you switch careers before you qualify, your mortgage process could fail or be bogged down.
Don't change banks or move money around in your accounts. Your lender will require you to submit recent bank statements of all of your accounts: checking, savings, money market, and other assets. To detect potential fraud, most loans require thorough paperwork to determine the source of all incoming funds. Switching banks or moving finances to another account - no matter the reason - could make it harder for your lender to review your funds.
Don't give your FSBO (for sale by owner) seller a "good faith" deposit, delivered to his door. Your earnest money does not belong to the seller: it remains yours until the transaction is final. Although your seller might not understand this, the good faith money must go toward the buyer's closing expenses. Find an attorney or other neutral person who is able to hold the funds or place them in a trust account until closing. The final disposition of earnest money, in the case of a failed transaction, should be included in the purchase agreement with your seller.
At Metro Mortgage, we answer questions about this process every day. Call us at 866-300-1550.