Things to Avoid While Purchasing a New Home
Many new homebuyers make the mistake of rushing out to buy things to fill their home soon after the seller says "yes" and the lender approves their loan. Keep in mind that until closing, your lender is watching your finances very closely. Below you'll find a list of things to stay away from during this critical time of your home purchase.
Don't make expensive purchases. You may be itching to order that new sofa for the soon-to-be-yours den, but it's advisable to stay away from making big ticket buys like furniture, appliances, jewelry, or cars until your home loan closes. Using plastic to buy new living room furniture could jeopardize your loan process by distorting your numbers. Since lending institutions are looking closely at your financial accounts, a large cash purchase is also a bad idea.
Don't go on a career search. Stability in your work history is a positive thing to lending institutions. Getting a new career before you apply for a loan may not get in the way of your approval at all. However, if you switch careers before approval, your process could fail or be stalled.
Don't move finances around or change banks. While the lender reviews your loan package, you will likely be required to submit bank statements for recent months for your checking and savings accounts, money market accounts and other liquid finances. To eliminate potential fraud, most lenders require a thorough paper trail to determine the source of all cash. No matter the reason, switching banks or transferring money can raise a red flag with your lender and slow down your loan process.
Don't hand over a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your good faith money is yours, not the seller's up until the deal closes. The earnest funds are to be applied to your expenses closing; some sellers may not understand this. We recommend that you put the funds into a trust account, or get an attorney to hold them until the deal closes. The final disposition of good faith funds, in the case of a failed transaction, should be indicated in the contract with your seller.
America's Home Loans can answer questions about these "Don'ts" and many others. Give us a call: 701.222.0100.