Things to Avoid While Buying a New Home
What's better than getting a bunch of new stuff to adorn your future home? Not much. But making large purchases before your loan closes could be trouble. Until the house is really yours, there still remain some hurdles to jump. Here are some actions to stay clear of before closing to assure the transaction goes smoothly.
Don't overspend on big-ticket items You may be itching to turn your new living room into a home magazine cover, or celebrate your new castle, but stay away from major purchases like furniture, jewelry, appliances, or vacations until closing. You may send up red flags with your lender if you purchase new furniture on your credit cards in the middle of your loan process. It's also a red flag to make those huge purchases using cash. Lending Institutions are looking at your cash reserve when considering your loan.
Don't look for a new career. Your recent job history should show consistency. Getting a new career before you apply for a mortgage may not affect your approval at all. However, if you switch careers before approval, your process could fail or be stalled.
Don't change banks or move money around in your accounts. As your lending institution reviews your loan package, you will probably be asked to provide bank statements for the last two or three months on your checking and savings accounts, money market funds and other liquid assets. In order to eliminate fraud, lenders need clear documentation of how you earn your living and where any additional money comes from. Even for practical reasons, transferring cash or switching banks may make it harder for your lender to document your bank history.
Don't give funds directly to your seller (generally in cases of "for sale by owner") to be used as a "good faith" deposit. Until closing, any good faith money remains yours. Although some individual sellers may not realize this, any good faith funds should be used for your closing expenses. Get an attorney or other neutral party who will hold the funds or place them in a trust account until closing. Should your home purchase fail, your contract with the seller should specify to whom this earnest money should go.
At Tier One Mortgage, LLC, we answer questions about this process every day. Give us a call: (585) 282-0960.