Things to Avoid While Purchasing a Home
With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of carrying their enthusiasm straight to the mall or appliance store. There are still a few major hurdles to jump before closing. Below you'll find a list of actions to stay away from during this crucial time of your home purchase.
Don't throw your money around. You may be itching to turn your new living room into a home magazine cover, or celebrate your new dream home, but keep away from expensive purchases like furniture, jewelry, appliances, or vacations until the loan closes. Your lender may send up red flags if you buy your furniture on your credit cards in the middle of your loan process. Using cash to buy big items can also be a problem: many lending institutions take into consideration your cash reserve when approving your mortgage.
Don't go on a job search. Stability in your job history is a good thing to lending institutions. Getting a new job before you apply for a loan may not jeopardize your approval at all. However, if you switch careers before approval, your mortgage process could fail or be bogged down.
Don't change banks or move finances around in your bank accounts. As the lending institution considers your mortgage application, you will likely be asked to submit bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To avoid potential fraud, most lenders require thorough paperwork to document the source of all incoming funds. Even for practical purposes, transferring finances or switching banks could make it difficult for the lending institution to document your account history.
Don't give your FSBO (for sale by owner) seller earnest money, delivered to his door. Until the sale is complete, the good faith deposit remains yours. Although some individual sellers might not know this, any good faith money must be used for the buyer's closing expenses. Find a lawyer or other neutral party who is able to hang on to the funds or put them in a trust account until closing. If your home purchase fails, the purchase contract should specify to whom the good faith funds should go.
At Foxfield Financial, we answer questions about this process every day. Give us a call at 720-598-8300.