What to Avoid During a Home Purchase
What's more fun than buying a bunch of new stuff to go in your future home? Not much. But making big ticket purchases before closing can be a mistake. There are still a few major hurdles to jump before your loan closes. Here are some things to refrain from before closing to be sure the transaction goes well.
Don't empty your wallet on big-ticket items Although you will be planning ways to turn your new home into a castle, try to stay away from big ticket purchases like appliances, electronics, or expensive furnishings. You will also want to avoid vacations and vehicle purchases until your loan closes. You may send up red flags with your lender if you buy your furniture on your credit cards during your loan process. It's also a red flag to make those large purchases using cash. Lending Institutions are looking at your cash on hand when considering your loan.
Don't get a new job. Your recent job history should show consistency. Finding a new career (particularly one with a bigger paycheck) may not hinder your ability to qualify for a mortgage. However, if you switch careers before approval, your process could fail or be stalled.
Don't move cash around or change banks. Bank statements from the last two or three months for accounts in your name (savings, checking, money market, and other assets) will be reviewed as the lending institution makes decisions regarding your application. To detect potential fraud, most lending institutions want detailed paperwork to determine the source of all incoming funds. No matter the reason, moving banks or transferring funds can raise a red flag with your lender and impede your loan process.
Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your earnest money is yours, not the seller's until the sale is final. The good faith funds are to be used for your expenses closing; some individual sellers may not realize this. A neutral party, like an attorney can hold your deposit, or you may put it temporarily into a trust account until you close. Should your sale fall through, your purchase agreement should specify where this good faith funds should go.
Firelight Mortgage Consultants can answer questions about these "Don'ts" and many others. Call us: (303) 228-2254.