Things to Avoid While Buying a Home
What's better than buying a bunch of new furnishings to go in your future home? Not much. But making large purchases before closing could be trouble. Keep in mind that until closing, your lender is watching your accounts very closely. Below you'll find a list of things to stay away from during this critical time of your home purchase.
Don't buy luxury items. Although you will be dreaming of ways to turn your new house into a castle, avoid major purchases like appliances, electronics, or expensive furnishings. You will also want to avoid vacations and car purchases until your loan closes. Financing new bedroom furniture with a store card or a bank credit card could jeopardize your credit worthiness during the time it means the most. It's even a bad idea to make those big-ticket purchases using cash. Lenders are looking at your cash on hand when considering your loan.
Don't look for a new career. Lending Institutions like to see a consistent career history on your application. Getting a new job may not jeopardize your ability to qualify for a mortgage loan - particularly if you are improving your salary. However, switching careers during the approval process may affect your approval.
Don't move finances around or switch banks. Most lenders will ask for recent bank statements of your accounts: checking, savings, money market, and other liquid assets. To avoid potential fraud, most loans need a thorough paper trail to verify the source of all incoming funds. Even for innocent reasons, transferring funds or switching banks may make it more difficult for the lender to verify your bank history.
Don't deliver a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your good faith deposit belongs to you, not to the seller up until the deal closes. A FSBO seller might not know that these good faith funds should be used for your expenses upon closing. Find a lawyer or other neutral person who can hang on to the funds or place them in a trust account until closing. The final disposition of good faith funds, if your home purchase falls through, should be indicated in the purchase agreement with your seller.