Don't Trip Yourself up While Buying your New Home
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Some new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller says "yes" and the lender approves the loan. Until the keys are handed over, there still remain some hoops to jump through. We have listed some things below you will want to stay away from when waiting for your loan to close.
Don't buy luxury items. You may be tempted to buy that new Turkish rug for the soon-to-be-yours parlor, but it's advisable to avoid making major buys like furniture, appliances, electronic equipment, or vacations until closing. Using plastic to buy furniture could compromise your loan process by altering your numbers dramatically. It's even a mistake to make those big-ticket purchases using cash. Lenders are examining your cash reserve when considering your loan.
Don't go on a job search. Consistency in your job history is a positive thing to lending institutions. Getting a new career before you start the application process for a loan may not get in the way of your approval at all. However, if you switch careers before approval, your process could fail or be slowed down.
Don't move money around or switch banks. Bank statements from the last two or three months for accounts in your name (savings, checking, money market, and others) will probably be studied as the lender considers your mortgage application. To eliminate potential fraud, most lenders want a detailed paper trail to document the source of all incoming funds. Switching banks or transferring money to another account - even if its just to consolidate funds - could make it difficult for the lender to review your funds.
Don't give earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your good faith deposit does not belong to the seller: it is actually yours until the sale closes. Although some individual sellers may not realize this, the good faith funds must be applied to the buyer's closing expenses. It's advisable to put the deposit into a trust account, or get a neutral party, like a lawyer, to hold it until closing. Should your home purchase fail, the purchase contract should dictate where your good faith deposit should go.
At Homeownership Financial , Inc, we answer questions about this process every day. Feel free to give us a call at (408) 292-5000.