Things to Avoid While Purchasing a Home
What's more fun than buying a bunch of new stuff to go in your future home? Not much. But buying big ticket items before your loan closes can be an error. Until the house is really yours, there still remain some hurdles to jump. Here are some things to refrain from during the home buying process to be sure your transaction goes smoothly.
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 advisable to avoid making major purchases like furniture, appliances, electronic equipment, or vacations until your home loan closes. Your credit numbers could change suddenly if you purchase new furniture using plastic. Using cash to buy big-ticket items can even create a problem: most lenders consider your available cash when approving your loan.
Don't go on a job search. Consistency in your career history is a positive thing to lenders. Getting a new job before you start the application process for a mortgage loan may not get in the way of your approval at all. However, switching jobs in the middle of your loan process may influence your approval.
Don't move cash around or switch banks. As the lender considers your loan application, you will probably be asked to provide bank statements for the last few months for your checking accounts, savings accounts, money market funds and other liquid finances. In order to detect fraud, lenders need a consistent portrayal of how you earn your money and where additional wealth comes from. No matter the reason, changing banks or moving money from one account to another can raise a red flag with your lender and slow your loan process.
Don't give money directly to your seller (generally in cases of "for sale by owner") to be used as earnest money. Until the sale is complete, the good faith money remains yours. Although your seller might not realize this, the good faith money must go toward your closing expenses. A neutral party, like an attorney can hold your earnest money, or you may put it temporarily into a trust account until you close. The contract should specify where the funds go if the transaction falls through.
Foxfield Financial can answer questions about these "Don'ts" and many others. Give us a call at 720-598-8300.