What to Avoid During a Home Purchase

What's better than buying a bunch of new stuff to go in your future home? Nothing. But buying big ticket items before your loan closes can be harmful. Keep in mind that until closing, your lender is watching your finances very closely. Here are some things to stay clear of before closing to assure the transaction goes well.

Don't make expensive purchases. You may be itching to buy that new couch for the soon-to-be-yours parlor, but it's best to avoid making big ticket purchases like furniture, appliances, jewelry, or vacations until closing. Financing new furniture with a store card or a bank credit card could jeopardize your credit worthiness during the time it means the most. Because lending institutions are looking closely at your bank accounts, a large cash purchase is also not advised.

Don't get a new job. Consistency in your career history is a positive thing to banks and other lenders. Getting a new job before you apply for a loan may not compromise your approval at all. But for some people, changing careers during the mortgage loan approval process could bring concern and affect your approval.

Don't take your accounts to a new bank or move around your money. Your lending institution will ask for recent bank statements on accounts in your name: savings, checking, money market, and other assets. To eliminate fraud, lenders want to see clear documentation of how you earn your living and where additional funds come from. Changing banks or moving finances elsewhere - even if its only to consolidate funds - may make it harder for your lender to review your funds.

Don't give funds directly to your seller (generally in the case of of "for sale by owner") for earnest money. Your good faith money does not belong to the seller: it remains yours until the sale closes. The good faith money is to be used for your expenses upon closing; the individual seller may not realize this. A neutral party, like an attorney can hold your funds, or you may put them temporarily into a trust account until you close. The disposition of earnest funds, in the case of a failed transaction, should be included in the purchase agreement with the seller.

At Tasha B. Bourgeois - NMLS ID 65461, we answer questions about this process every day. Call us: 5048884104.