Things to Avoid While Buying a New Home
With the thrill that comes with an accepted offer and a "yes" from the lender, many homebuyers make the mistake of carrying their enthusiasm straight to the mall or appliance store. Keep in mind that until closing, your lender is watching your finances very closely. Here are some actions to avoid during the home buying process to be sure your transaction goes well.
Don't empty your wallet on big-ticket items 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. Financing new stainless steel appliances with a store card or a bank credit card could jeopardize your credit worthiness during the time it means the most. Using cash to buy expensive items can even be a mistake: many lending institutions consider your cash on hand when approving your application.
Don't get a new job. Your recent career history should show stability. Getting a new career before you apply for a loan may not affect your approval at all. However, getting a new career during your approval process might influence whether or not you are approved.
Don't switch banks or move cash around in your accounts. While your lender reviews your mortgage package, you will probably be asked to submit bank statements for the last two or three months on your checking and savings accounts, money market funds and other liquid finances. To avoid potential fraud, most lending institutions require thorough paperwork to determine the source of all incoming funds. No matter the purpose, moving banks or transferring money can raise a red flag with your lender and slow your approval process.
Don't give earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your good faith deposit does not belong to the seller: it remains yours until the sale closes. The good faith money is to be used for your expenses upon closing; some individual sellers may not know this. 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 final disposition of earnest money, in the case of a failed transaction, should be included in the purchase agreement with your seller.
Foxfield Financial can answer questions about these "Don'ts" and many others. Call us: 720-598-8300.