What to Avoid During a Home Purchase
Some new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller says "yes" and the loan is approved. Keep in mind that until you get the keys, your lender is watching your finances very closely. Below you'll find a list of things to avoid during this critical time of your home purchase.
Don't buy 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 expensive purchases like furniture, jewelry, appliances, or vacations until closing. Financing new Plasma TVs with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Using cash to buy big items can even be a problem: many lenders consider your cash on hand when approving your application.
Don't get a new job. Lenders like to see a consistent career history on your paperwork. Finding a new job (particularly one with a bigger paycheck) may not hinder your ability to qualify for your mortgage loan. However, getting a new career during the application process might influence whether or not you are approved.
Don't change banks or move money around in your accounts. Bank statements from recent months for accounts in your name (savings, checking, money market, and other accounts) will be reviewed as the lending institution makes decisions regarding your approval. The lending institution looks for a steady flow of your money over the pay period, in order to avoid fraud. Even for practical purposes, moving around finances or switching banks may make it more difficult for the lending institution to document your bank history.
Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. As a rule, your earnest money is yours, not the seller's until the sale is final. A FSBO seller might not know that these good faith funds is to go toward your expenses at closing. We recommend that you put the funds into a trust account, or get an attorney to hold them until the closing of the sale. The disposition of earnest funds, if your sale falls through, should be specified in the contract with the seller.
At Tenby J. Dahman, we answer questions about this process every day. Call us: (303) 862-7760.