Things to Avoid While Purchasing a Home
What's more fun than buying a bunch of new furnishings to go in your future home? Nothing. But buying big ticket items before closing can be harmful. Keep in mind that until you get the keys, your lender is watching your accounts very closely. Here are some things to avoid before closing to assure your transaction goes well.
Don't buy luxury items. You may be tempted to order that new sofa for the soon-to-be-yours den, but it's advisable to avoid making large purchases like furniture, appliances, electronic equipment, or cars until closing. Using credit cards to buy furniture could compromise your lending process by distorting your numbers. It's even a red flag to make those huge purchases using cash. Lenders are looking at your available cash when considering your loan.
Don't go on a career search. Your recent work history should show stability. 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, finding a new job in the middle of the application process could affect your approval.
Don't switch banks or move cash around in your bank accounts. As the lender considers your mortgage loan package, you will probably be required to produce bank statements for the last two or three months on your saving and checking accounts, money market funds and other liquid assets. To detect fraud, lenders look for a clear and consistent picture of how you earn your living and where any additional funds come from. No matter the reason, changing banks or moving money from one account to another may raise a red flag with your lender and impede your approval process.
Don't give money directly to your seller (commonly in cases of "for sale by owner") for a "good faith" deposit. As a rule, your earnest money is yours, not the seller's until closing. Any good faith funds are to go toward your expenses upon closing; some individual sellers might not understand this. A neutral party, like an attorney can hang onto your funds, or you may put them temporarily into a trust account until you close. If your sale falls through, the contract with the seller should indicate to whom your good faith funds should go.
At Net Equity Financial Mortgage, we answer questions about this process every day. Call us: (215)741-3131.