Don't Trip Yourself up While Buying your Home
What's more fun than buying a bunch of new furnishings to adorn your future home? Not much. But buying big ticket items before your loan closes could be trouble. It's best 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 critical time of your home purchase.
Don't buy luxury items. Although you may be planning ways to turn your new home into a castle, try to stay away from big ticket purchases like appliances, electronics, or furniture. You will also want to stay away from vacations and vehicle purchases until your loan closes. Using credit cards to buy new living room furniture could jeopardize your lending process by distorting your numbers. Since lenders are looking closely at your financial accounts, a large cash purchase is also not advised.
Don't look for a new career. Stability in your job history is a good thing to lending institutions. Changing jobs may not compromise your ability to qualify for a mortgage loan - especially if you are going to be making more money. However, if you switch careers before approval, your loan process could fail or be stalled.
Don't change banks or move finances around in your bank accounts. As your lender considers your loan package, you will likely be asked to produce bank statements for recent months for your saving and checking accounts, money market funds and other liquid finances. To eliminate fraud, lenders look for a consistent portrayal of how you earn your money and where any additional money comes from. Even for practical purposes, transferring money or changing banks may make it difficult for your lender to confirm your account history.
Don't hand over earnest money directly to the seller in a FSBO (for sale by owner) purchase. Until the completion of the deal, any good faith money remains yours. Any earnest funds are to be applied to your expenses upon closing; some sellers may not know this. Find an attorney or other neutral party who can hang on to the funds or put them in a trust account until closing. Should your home purchase fail, the contract with the seller should dictate to whom this good faith funds should go.