What to Avoid During a Home Purchase

Many new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller accepts their offer and the loan is approved. Until your loan closes, there are still some hurdles to jump. Here are some actions to avoid before closing to be sure the transaction goes well.

Don't make expensive purchases. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new castle, but stay away from major purchases like furniture, jewelry, appliances, or vacations until closing. Your credit numbers could change suddenly if you purchase new furniture using plastic. Using cash to buy big-ticket items can also create an issue: most lending institutions take into consideration your cash on hand when approving your loan.

Don't look for a new job. Lending Institutions feel comfortable seeing a consistent job history on your paperwork. Finding a new career (especially one with a bump in salary) may not jeopardize your ability to qualify for a loan. However, if you switch careers before your loan is approved, your loan process could fail or be stalled.

Don't change banks or move finances around in your bank accounts. Bank statements from the last two or three months for your accounts (savings, checking, money market, and other accounts) will probably be analyzed as the lender makes decisions regarding your mortgage application. To avoid fraud, lenders will need clear documentation of how you earn your living and where any additional money comes from. Even for practical purposes, transferring funds or switching banks could make it difficult for the lender to verify your bank history.

Don't give money directly to your seller (commonly in the case of of "for sale by owner") for earnest money. As a rule, your earnest money is yours, not the seller's until closing. Although some FSBO sellers might not know this, the good faith funds should be applied to your closing expenses. Get a lawyer or other neutral person who will hang on to the money or place it in a trust account until closing. The disposition of good faith funds, if your home purchase falls through, should be specified in the contract with your seller.

The Mortgage Exchange Service LLC can answer questions about these "Don'ts" and many others. Call us at 703.255-5810.

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