What to Avoid During your Home Purchase
What's better than getting a bunch of new furniture to adorn your future home? Nothing. But making large purchases before closing could be trouble. There still remain a few major hurdles to jump before closing. 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. Although you will be planning ways to turn your new home into a showplace, avoid big ticket purchases like appliances, electronics, or expensive furnishings. We also recommend that you stay away from vacations and car purchases until the closing of your loan. Financing your furniture with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. Using cash to purchase expensive items can also be an issue: most banks take into consideration your cash on hand when approving your application.
Don't go on a career search. Your recent work history should show consistency. Finding a new career (especially one with a better paycheck) may not affect your ability to qualify for your loan. However, if you switch careers before you qualify, your mortgage process could fail or be slowed down.
Don't switch your accounts to a new bank or move around your finances. As the lender considers your loan package, you will likely be instructed to submit bank statements for the last few months for your checking and savings accounts, money market funds and other liquid finances. To detect fraud, lenders want to see a clear and consistent picture of how you earn your living and where any additional funds come from. No matter the reason, changing banks or moving funds from one account to another might raise a red flag with the lender and slow down your approval process.
Don't hand over a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your good faith deposit does not belong to the seller: it remains yours until the transaction is final. The earnest money is to be used for your expenses upon closing; some sellers might not know this. A neutral party, like an attorney can hang onto your funds, or you may put them temporarily into a trust account until closing. The purchase contract should document who keeps the deposit if the home purchase fails.
At Southwest Funding #841, we answer questions about this process every day. Call us: (512) 291-6100.