What to Avoid During a Home Purchase
What's better than buying a bunch of new furniture to go in your future home? Not much. But buying big ticket items before closing can be a mistake. Keep in mind that until you get the keys, your lender is watching your finances very closely. Here are some things to stay clear of before closing to assure the transaction goes well.
Don't make expensive purchases. You may be tempted to order that new sofa for the soon-to-be-yours parlor, but it's best to avoid making major purchases like furniture, appliances, electronic equipment, or vacations until your home loan closes. Financing your bedroom furniture with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. Using cash to buy big items can also be a bad idea: most banks look at your available cash when approving your mortgage loan.
Don't get a new career. Your recent career history should show consistency. Getting a new job may not jeopardize your ability to qualify for a loan - particularly if you are going to be making more money. However, finding a new career during the loan process may affect your approval.
Don't switch banks or move cash around in your bank accounts. Bank statements from the last few months for accounts in your name (checking, savings, money market, and other accounts) will be studied as the lender considers your application. To eliminate potential fraud, most lenders need a thorough paper trail to verify the source of all funds. Even for innocent purposes, moving around cash or switching banks might make it harder for the lender to verify your bank history.
Don't give funds directly to your seller (commonly in the case of of "for sale by owner") for a "good faith" deposit. Your good faith money does not belong to the seller: it remains yours until closing. Any earnest money is to be applied to your expenses closing; some sellers may not realize this. You'll want to put the money into a trust account, or get an attorney to hold it until the closing of the sale. The disposition of good faith money, in the case of a failed transaction, should be written in the contract with your seller.
At Nationwide Home Loans, we answer questions about this process every day. Call us: (562) 693-5048.