What to Avoid During a Home Purchase
With the thrill that comes with an accepted offer and a "yes" from the lender, many homebuyers make the error of carrying their enthusiasm straight to the mall or appliance store. It's best to remember that until closing, your lender is watching your accounts very closely. Below you'll find a list of things to avoid during this crucial time of your home purchase.
Don't make expensive purchases. Although you will be listing ways to turn your new home into a castle, avoid major purchases like appliances, electronics, or furniture. You will also want to stay away from vacations and car purchases until your loan closes. Using credit cards to buy furniture could jeopardize your lending process by distorting your numbers. Using cash to purchase big-ticket items can also create a bad idea: many lenders consider your cash on hand when approving your mortgage loan.
Don't go on a career search. Consistency in your job history is a good thing to banks and other lenders. Finding a new career (particularly one with a better paycheck) may not jeopardize your ability to qualify for your mortgage loan. However, if you switch careers before approval, your mortgage process could fail or be stalled.
Don't take your accounts to a new bank or move around your finances. While the lender considers your loan application, you will likely be asked to produce bank statements for recent months on your checking and savings accounts, money market funds and other liquid assets. To avoid potential fraud, most loans want a thorough paper trail to verify the source of all incoming funds. No matter the reason, switching banks or transferring money may raise a red flag with the lender and slow your application process.
Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. As a rule, your good faith deposit is yours, not the seller's until closing. Some sellers may not realize that this earnest money must go toward your expenses at closing. Find a lawyer or other neutral party who is able to hold the funds or place them in a trust account until you close. The disposition of earnest funds, in the case of a failed transaction, should be included in the contract with the seller.
At Homewood Mortgage, Inc., we answer questions about this process every day. Give us a call at 205-941-1484.