Things to Avoid While Purchasing a New Home
With the thrill that comes with an accepted offer and a “yes” from the lender, some homebuyers make the mistake of carrying their enthusiasm straight to the mall or appliance store. It’s best to remember that until closing, 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 make expensive purchases. You may be itching to turn your new living room into a showplace, or celebrate your new dream home, but stay away from big purchases like furniture, jewelry, appliances, or vacations until closing. Your credit numbers could change suddenly if you purchase new furniture using plastic. Because lending institutions are reviewing your bank accounts, a large cash purchase is also a mistake.
Don’t go on a career search. Lenders like to see a consistent work history on your paperwork. Finding a new career (particularly one with a bigger salary) may not change your ability to qualify for a loan. However, if you switch careers before your loan is approved, your process could fail or be stalled.
Don’t change banks or move finances around in your accounts. Bank statements from the last few months for accounts in your name (savings, checking, money market, and other accounts) will probably be reviewed as the lender makes decisions regarding your loan application. To eliminate fraud, lenders need clear documentation of how you earn your money and where any additional money comes from. Changing banks or moving finances to another account – even if its just to pool funds – could hinder the review of your accounts.
Don’t give a “good faith” deposit directly to the seller in a FSBO (for sale by owner) purchase. Until closing, the earnest money actually belongs to you. Some FSBO sellers may not realize that this earnest money must go toward your expenses at closing. We recommend that you put the money into a trust account, or get a neutral party, like a lawyer, to hold it until the deal closes. The final disposition of earnest money, if your sale falls through, should be documented in the contract with your seller.