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 mistake of taking their enthusiasm straight to the mall or appliance store. It's wise to remember that until closing, your lender is watching your finances very closely. We have listed some things below we suggest you stay away from when waiting for closing.
Don't empty your wallet on big-ticket items It may be tempting to order that new couch for the soon-to-be-yours den, but it's best to avoid making big ticket purchases like furniture, appliances, jewelry, or vacations until closing. Financing new stainless steel appliances with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. Since lenders are examining your financial accounts, a large cash purchase is also not advised.
Don't get a new career. Your recent career history should show stability. Getting a new job before you apply for a mortgage may not jeopardize your approval at all. But in some cases, getting a new career during the mortgage loan approval process could raise concern and stymie your approval.
Don't switch your accounts to a new bank or move around your finances. As the lender considers your mortgage application, you will probably be asked to submit bank statements for the last few months on your checking accounts, savings accounts, money market accounts and other liquid wealth. To avoid fraud, lenders need a consistent portrayal of how you earn your money and where additional funds come from. Even for practical reasons, moving around money or changing banks might make it difficult for the lending institution to confirm your bank history.
Don't give funds directly to your seller (commonly in the case of of "for sale by owner") to be considered earnest money. As a rule, your earnest money belongs to you, not the seller until closing. Although your seller may not realize this, your good faith money must be used for your closing expenses. We recommend that you put the deposit into a trust account, or get an attorney to hold it until closing. The final disposition of good faith money, in the case of a failed transaction, should be indicated in the purchase agreement with the seller.
At Homewood Mortgage, Inc., we answer questions about this process every day. Give us a call at 205-941-1484.