What to Avoid During a Home Purchase
What's better than getting a bunch of new furniture to adorn your future home? Nothing. But making big ticket purchases before closing could be trouble. It's best to remember that until closing, your lender is watching your finances very closely. Below you'll find a list of things to stay away from during this crucial time of your home purchase.
Don't buy luxury items. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new castle, but keep away from big purchases like furniture, jewelry, appliances, or vacations until your loan closes. Using credit cards to buy new living room furniture could compromise your loan process by distorting your numbers. It's also a bad idea to make those large purchases using cash. Lenders are looking at your cash on hand when considering your loan.
Don't go on a job search. Consistency in your work history is a good thing to banks and other lenders. Finding a new career (particularly one with a bigger paycheck) may not jeopardize your ability to qualify for your mortgage loan. However, if you switch careers before your loan is approved, your mortgage process could fail or be slowed down.
Don't switch banks or move money around in your bank accounts. Bank statements from recent months for accounts in your name (checking, savings, money market, and other accounts) will likely be reviewed as the lending institution makes decisions regarding your loan application. Your lending institution looks for a steady rise and fall of your funds each pay period, in order to rule out fraud. Changing banks or moving money elsewhere - even if its just to pool funds - might make it difficult for your lender to document your funds.
Don't deliver 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 sale closes. Any earnest funds are to go toward your expenses closing; some FSBO sellers might not realize this. Get an attorney or other neutral party who will hold the funds or put them in a trust account until you close. The disposition of good faith funds, if your sale falls through, should be specified in the contract with the seller.
Firelight Mortgage Consultants can walk you through the pitfalls of getting a mortgage. Call us: (303) 228-2254.