Things to Avoid While Purchasing a New Home
What's better than getting a bunch of new furniture to go in your future home? Nothing. But buying big ticket items before your loan closes can be an error. There are still a few major hurdles to jump before the keys are handed over. Below you'll find a list of actions to avoid during this critical time of your home purchase.
Don't empty your wallet on big-ticket items Although you may be dreaming of ways to turn your new house into a showplace, avoid major purchases like appliances, electronics, or furniture. We also recommend that you stay away from vacations and car purchases until your loan closes. Financing your furniture with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Since lending institutions are looking closely at your financial accounts, a large cash purchase is also not advised.
Don't get a new career. Your recent job history should show consistency. Getting a new career before you apply for a loan may not compromise your approval at all. But in some cases, getting a new career during the loan approval process may bring concern and affect your approval.
Don't move money around or change banks. As your lender considers your mortgage loan package, you will likely be required to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid finances. To avoid fraud, lenders want to see clear documentation of how you earn your living and where any additional wealth comes from. Even for innocent reasons, transferring money or switching banks could make it more difficult for your lender to document your account history.
Don't give funds directly to your seller (usually in the case of of "for sale by owner") to be considered a "good faith" deposit. Until the sale is complete, the good faith money remains yours. Your earnest money is to be applied to your expenses upon closing; some sellers may not realize this. You'll need to put the money into a trust account, or get a neutral party, like a lawyer, to hold it until the closing of the sale. The disposition of earnest money, if your home purchase fails, should be specified in the purchase agreement with the seller.
At The Mortgage Exchange Service LLC, we answer questions about this process every day. Give us a call at 703.255-5810.