What to Avoid During a Home Purchase
What's more fun than getting a bunch of new furnishings to adorn your future home? Not much. But buying big ticket items before your loan closes could be trouble. It's best to remember that until you get the keys, your lender is watching you very closely. We have listed some things below you will want to avoid when waiting for closing.
Don't make expensive purchases. Although you may be planning ways to turn your new home into a castle, avoid big ticket purchases like appliances, electronics, or expensive furnishings. We also recommend that you stay away from vacations and car purchases until the closing of your loan. Using plastic to buy new living room furniture could jeopardize your loan process by distorting your numbers. Because lenders are examining your financial accounts, a large cash purchase is also not advised.
Don't go on a career search. Lenders feel comfortable seeing a consistent job history on your paperwork. Getting a new job before you apply for a mortgage may not get in the way of your approval at all. However, if you switch careers before your loan is approved, your process could fail or be stalled.
Don't switch your accounts to a new bank or move around your money. While your lending institution reviews your mortgage loan package, you will likely be instructed to submit bank statements for the last few months for your checking and savings accounts, money market funds and other liquid wealth. In order to eliminate fraud, lenders want to see a clear and consistent picture of how you earn your living and where additional money comes from. Switching banks or moving funds to another account - no matter the purpose - might hinder the documentation of your accounts.
Don't give money directly to your seller (usually in the case of of "for sale by owner") for earnest money. Until closing, any earnest money remains yours. Although your FSBO seller might not know this, any earnest money must go toward the buyer's closing expenses. An attorney or other type of neutral party can hold your earnest money, or you may put it temporarily into a trust account until closing. If your sale falls through, the purchase contract should dictate where the earnest money should go.
At Foxfield Financial, we answer questions about this process every day. Give us a call at 720-598-8300.