What to Avoid During a Home Purchase
Some new homebuyers make the mistake of rushing out to buy new things for their home soon after the seller accepts their offer and the lender approves the loan. It's best to remember that until you get the keys, your lender is watching your accounts very closely. Below you'll find a list of things to avoid during this critical time of your home purchase.
Don't throw your money around. You may be itching to buy that new couch for the soon-to-be-yours living room, but it's best to stay away from making major buys like furniture, appliances, jewelry, or cars until closing. Using credit cards to buy new living room furniture could compromise your lending process by changing your numbers dramatically. It's even a red flag to make those huge purchases using cash. Lenders are looking at your cash reserve when considering your loan.
Don't go on a career search. Consistency in your career history is a good thing to lenders. Getting a new job may not affect your ability to qualify for a loan - especially if you are going to be making more money. But for some, changing careers during the mortgage application process might raise concern and hinder your approval.
Don't switch banks or move money around in your accounts. As the lending institution reviews your loan package, you will probably be asked to provide bank statements for the last few months on your checking and savings accounts, money market accounts and other liquid assets. In order to eliminate fraud, lenders want to see clear documentation of how you earn your money and where any additional money comes from. Switching banks or transferring funds elsewhere - no matter the reason - could hinder the documentation of your funds.
Don't give funds directly to your seller (commonly in the case of of "for sale by owner") for earnest money. Your good faith deposit does not belong to the seller: it is actually yours until closing. The good faith money is to be applied to your expenses upon closing; the individual seller may not realize this. An attorney or other type of neutral party can hold your funds, or you may place them temporarily into a trust account until closing. Should your home purchase fail, your purchase agreement should document to whom this earnest money should go.
Reliance Mortgage Service, Inc can answer questions about these "Don'ts" and many others. Give us a call: 562 320-0510.