What to Avoid During a Home Purchase
In the rush of excitement that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of carrying their enthusiasm straight to the mall or furniture store. There are still a few major hurdles to jump before closing. We have given you a list of things below we suggest you avoid when waiting for your loan to close.
Don't throw your money around. Although you may be planning ways to turn your new home into a showplace, try to stay away from big ticket purchases like appliances, electronics, or furniture. We also recommend that you stay away from vacations and vehicle purchases until your loan closes. Financing your bedroom furniture with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Because lenders are reviewing your financial accounts, a large cash purchase is also not advised.
Don't get a new job. Lending Institutions like to see a consistent career history on your application forms. Finding a new job (especially one with a better paycheck) may not jeopardize your ability to qualify for a mortgage loan. But for some people, getting a new career during the mortgage approval process could bring concern and stymie your application.
Don't change banks or move cash around in your accounts. As the lending institution considers your loan package, you will likely be instructed to submit bank statements for the last two or three months on your checking and savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans want thorough paperwork to verify the source of all funds. Changing banks or transferring funds elsewhere - for whatever reason - may hinder the review of your accounts.
Don't give funds directly to your seller (generally in the case of of "for sale by owner") for a "good faith" deposit. As a rule, your good faith money belongs to you, not to the seller until the sale is final. Although some individual sellers may not realize this, any good faith money should go toward the buyer's closing expenses. Get a lawyer or other neutral party who will hang on to the deposit or place it in a trust account until you close. The purchase contract should specify to whom the funds go if the home purchase fails.
At Chris Caggiano - Grand Oaks Funding, LLC, we answer questions about this process every day. Call us at (718) 477-4405.