What to Avoid During a Home Purchase
What's more fun than buying a bunch of new furniture to go in your future home? Not much. But making large purchases before your loan closes can be harmful. It's best to remember that until you get the keys, your lender is watching your finances very closely. Below you'll find a list of things to stay away from during this crucial time of your home purchase.
Don't empty your wallet on big-ticket items Although you will be dreaming of ways to turn your new home into a castle, avoid big ticket purchases like appliances, electronics, or expensive furnishings. We also recommend that you avoid vacations and vehicle purchases until your loan closes. Your credit numbers could be altered suddenly if you purchase new furniture using credit cards. Using cash to buy expensive items can also be a bad idea: many banks look at your cash reserve when approving your mortgage loan.
Don't go on a career search. Lending Institutions look for a consistent work history on your application forms. Getting a new job before you start the application process for a mortgage loan may not affect your approval at all. However, if you switch careers before your loan is approved, your process could fail or be stalled.
Don't switch your accounts to a new bank or move around your money. Bank statements from recent months for accounts in your name (checking, savings, money market, and others) will likely be reviewed as the lending institution considers your application. To eliminate potential fraud, most loans require a detailed paper trail to document the source of all incoming funds. Changing banks or moving finances to another account - for whatever reason - may hinder the review of your funds.
Don't give your FSBO (for sale by owner) seller a "good faith" deposit, delivered to his door. As a rule, your good faith deposit belongs to you, not the seller until the sale is final. Although some FSBO sellers may not realize this, the good faith money should be used for your closing expenses. Find an attorney or other neutral party who will hang on to the funds or place them in a trust account until you close. The contract should specify where the funds go if the home purchase falls through.
At Capacity Lending, LLC, we answer questions about this process every day. Call us at 469-640-0400.