What to Avoid During your Home Purchase
What's better than getting a bunch of new stuff to adorn your future home? Not much. But buying big ticket items before closing could be trouble. Keep in mind that until closing, your lender is watching your accounts very closely. Here are some actions to refrain from before closing to be sure the transaction goes smoothly.
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 keep away from major 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 purchase big-ticket items can even create a bad idea: many lenders consider your cash on hand when approving your loan.
Don't look for a new job. Lenders like to see a consistent job history on your paperwork. Changing jobs may not compromise your ability to qualify for a mortgage loan - particularly if you are improving your salary. However, switching careers in the middle of the application process may affect your approval.
Don't switch banks or move cash around in your bank accounts. While your lender reviews your mortgage loan package, you will likely be instructed to submit bank statements for recent months for your saving and checking accounts, money market funds and other liquid wealth. Your lending institution wants to see a consistent rise and fall of your funds over the month, in order to avoid fraud. Even for innocent reasons, transferring funds or changing banks may make it harder for your lending institution to document your bank history.
Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. Your good faith deposit does not belong to the seller: it is actually yours until the sale closes. Although your seller might not know this, any good faith money must be applied to your closing expenses. It's best to put the money into a trust account, or get a neutral party, like a lawyer, to hold it until the closing of the sale. The disposition of good faith funds, if your home purchase fails, should be written in the contract with your seller.
At America's Home Loans, we answer questions about this process every day. Call us at 701.222.0100.