Don't Trip Yourself up While Buying your Home

Many new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller says "yes" and the lender approves their loan. There still remain a few major hurdles to jump before your loan closes. Below you'll find a list of actions to stay away from during this critical time of your home purchase.

Don't buy big-ticket items. It may be tempting to order that new couch for the soon-to-be-yours den, but it's best to avoid making major purchases like furniture, appliances, electronic equipment, or vacations until your home loan closes. Financing your stainless steel appliances with a store card or a bank credit card could jeopardize your credit worthiness when you need it the most. Using cash to purchase big-ticket items can even create a mistake: most lending institutions consider your cash reserve when approving your loan.

Don't go on a job search. Stability in your work history is a positive thing to lenders. Finding a new job (especially one with a bigger salary) may not change your ability to qualify for a loan. But for some people, changing jobs during the loan approval process might raise concern and stymie your approval.

Don't take your accounts to a new bank or move around your cash. Bank statements from the last two or three months for your accounts (savings, checking, money market, and other accounts) will likely be studied as the lending institution makes decisions regarding your approval. To eliminate potential fraud, most lenders need a detailed paper trail to determine the source of all incoming funds. Even for innocent reasons, moving around finances or changing banks may make it harder for the lending institution to confirm your bank history.

Don't give money directly to your seller (generally in cases of "for sale by owner") for a "good faith" deposit. Your good faith deposit does not belong to the seller: it remains yours until the sale closes. Your FSBO seller might not realize that any earnest money should be used for your expenses upon closing. A neutral party, like an attorney can hold onto your earnest money, or you may put it temporarily into a trust account until closing. The disposition of good faith funds, if your home purchase falls through, should be specified in the contract with your seller.

At Capacity Lending, LLC, we answer questions about this process every day. Call us: 469-640-0400.

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