What to Avoid During a Home Purchase
With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of taking their enthusiasm straight to the mall or furniture store. It's wise to remember that until your keys are in hand, your lender is watching your finances very closely. We have listed some actions below we suggest you stay away from when waiting for your loan to close.
Don't buy luxury items. You may be itching to turn your new living room into a home magazine cover, or celebrate your new castle, but stay away from big purchases like furniture, cars, appliances, or vacations until closing. Financing your stainless steel appliances with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Using cash to purchase big items can even create a problem: most lending institutions look at your cash reserve when approving your mortgage.
Don't get a new career. Consistency in your career history is a good thing to lenders. Getting a new job before you start the application process for a mortgage may not get in the way of your approval at all. However, finding a new job during your application process might affect your approval.
Don't take your accounts to a new bank or move around your cash. While your lending institution reviews your loan application, you will probably be instructed to provide bank statements for recent months for your saving and checking accounts, money market accounts and other liquid finances. The lending institution is looking for a steady rise and fall of your funds each month, in order to avoid fraud. No matter the reason, moving banks or transferring money may raise a red flag with your lender and slow down your loan process.
Don't give your FSBO (for sale by owner) seller a "good faith" deposit, made out directly to him. Your good faith deposit does not belong to the seller: it is actually yours until the sale closes. Any earnest funds are to be used for your expenses closing; some FSBO sellers may not understand this. We recommend that you put the funds into a trust account, or get an attorney to hold them until the deal closes. The purchase contract should dictate to whom the deposit goes if the home purchase falls through.
At Firelight Mortgage Consultants, we answer questions about this process every day. Call us: (303) 228-2254.