Things to Avoid While Buying a New Home
What's more fun than buying a bunch of new furnishings to go in your future home? Nothing. But making big ticket purchases before your loan closes can be harmful. There are still a few major hurdles to jump before closing. We have given you a list of actions below we suggest you stay away from when waiting for closing.
Don't buy luxury items. You may be itching to order that new sofa for the soon-to-be-yours parlor, but it's best to avoid making large purchases like furniture, appliances, electronic equipment, or vacations until your home loan closes. You may send up red flags with your lender if you buy new furniture on your credit cards in the middle of your loan process. It's even a bad idea to make those big-ticket purchases using cash. Lending Institutions are examining your cash on hand when considering your loan.
Don't go on a job search. Stability in your career history is a positive thing to banks and other lenders. Changing jobs may not jeopardize your ability to qualify for a mortgage loan - especially if you are getting a bigger paycheck. However, if you switch careers before your loan is approved, your mortgage process could fail or be stalled.
Don't move finances around or change banks. Bank statements from recent months for accounts in your name (checking, savings, money market, and others) will likely be reviewed as the lending institution makes decisions regarding your approval. Your lending institution will need to see a consistent rise and fall of your funds over the pay period, in order to rule out fraud. Even for practical reasons, transferring cash or switching banks could make it difficult for the lender to document your account history.
Don't give funds directly to your seller (generally in cases of "for sale by owner") for a "good faith" deposit. As a rule, your good faith money is yours, not the seller's up until the deal closes. The FSBO seller may not realize that any good faith funds is to go toward your expenses upon closing. Find a lawyer or other neutral person who is able to hang on to the money or place it in a trust account until closing. The contract should document to whom the deposit goes if the home purchase falls through.
At Net Equity Financial Mortgage, we answer questions about this process every day. Call us: (215)741-3131.