What to Avoid During a Home Purchase
With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of taking their enthusiasm straight to the mall or appliance store. Keep in mind that until your keys are in hand, your lender is watching your finances very closely. Here are some actions to avoid before closing to assure your transaction goes well.
Don't empty your wallet 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 expensive purchases like furniture, cars, appliances, or vacations until the loan closes. Using plastic to buy furniture could compromise your lending process by distorting your numbers. It's also a mistake to make those large purchases using cash. Lending Institutions are looking at your cash reserve when considering your loan.
Don't get a new job. Lenders feel comfortable seeing a consistent work history on your application. Getting a new job before you start the application process for a mortgage loan may not jeopardize your approval at all. But for some people, changing careers during the mortgage loan approval process could raise concern and hinder your application.
Don't take your accounts to a new bank or move around your money. As the lending institution reviews your mortgage application, you will probably be instructed to produce bank statements for the last two or three months on your saving and checking accounts, money market funds and other liquid assets. In order to eliminate fraud, lenders want to see clear documentation of how you earn your living and where any additional funds come from. Even for innocent purposes, transferring finances or switching banks could make it difficult for your lending institution to document your bank history.
Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your good faith money does not belong to the seller: it is actually yours until closing. Any earnest funds are to be used for your expenses upon closing; some sellers might not understand this. You'll need to put the funds into a trust account, or get an attorney to hold them until the deal closes. The contract should dictate to whom the deposit goes if the home purchase fails.
At Stepping Stone Mortgage, we answer questions about this process every day. Give us a call at (541) 683-3300.