Things to Avoid While Purchasing a New Home
Many new homebuyers make the mistake of rushing out to buy new things for their home soon after the seller accepts their offer and the lender approves the loan. There still remain a few major hurdles to jump before your loan closes. Here are some actions to stay clear of before closing to be sure the transaction goes smoothly.
Don't overspend on big-ticket items You may be itching to turn your new kitchen into a showplace, or celebrate your new castle, but keep away from big purchases like furniture, jewelry, appliances, or vacations until your loan closes. Financing your Plasma TVs with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. Because lending institutions are perusing your financial accounts, a large cash purchase is also a mistake.
Don't get a new job. Stability in your career history is a positive thing to lending institutions. Changing jobs may not jeopardize your ability to qualify for a mortgage loan - particularly if you are going to be making more money. However, switching careers in the middle of your loan process could influence whether or not you are approved.
Don't switch banks or move money around in your accounts. While the lender considers your mortgage package, you will probably be instructed to produce bank statements for recent months for your checking and savings accounts, money market funds and other liquid finances. To detect potential fraud, most lenders need detailed paperwork to verify the source of all cash. Even for practical purposes, transferring cash or switching banks may make it harder for the lending institution to document your account history.
Don't give money directly to your seller (generally in cases of "for sale by owner") for earnest money. Your good faith deposit does not belong to the seller: it remains yours until closing. The good faith funds are to be applied to your expenses closing; some sellers might not understand this. An attorney or other type of neutral party can hang onto your deposit, or you may put it temporarily into a trust account until closing. The disposition of earnest money, if your home purchase fails, should be included in the contract with the seller.
At Net Equity Financial Mortgage, we answer questions about this process every day. Give us a call at (215)741-3131.