Things to Avoid While Purchasing a Home
Many new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller says "yes" and the lender approves the loan. There are still a few major hurdles to jump before your loan closes. We have given you a list of actions below we suggest you stay away from when waiting for closing.
Don't make expensive purchases. Although you will be planning ways to turn your new home into a showplace, avoid major purchases like appliances, electronics, or furniture. You will also want to keep away from vacations and vehicle purchases until your loan closes. Your credit numbers could change suddenly if you purchase new furniture using credit cards. Since lenders are reviewing your financial accounts, a large cash purchase is also not advised.
Don't get a new job. Lending Institutions like to see a consistent job history on your application. Getting a new career before you apply for a mortgage may not compromise your approval at all. However, if you switch careers before approval, your mortgage process could fail or be slowed down.
Don't change banks or move finances around in your bank accounts. Bank statements from the last few months for all of your accounts (savings, checking, money market, and other assets) will probably be studied as the lender considers your application. To avoid potential fraud, most lenders require detailed paperwork to determine the source of all incoming funds. No matter the purpose, switching banks or transferring money can raise a red flag with your lender and impede your application process.
Don't give cash directly to your seller (commonly in cases of "for sale by owner") to be considered earnest money. Until the completion of the deal, any earnest money remains yours. Although your seller might not know this, your earnest money should be used for the buyer's closing expenses. An attorney or other type of neutral party can hold your earnest money, or you may put it temporarily into a trust account until closing. The disposition of earnest funds, in the case of a failed transaction, should be specified in the contract with the seller.
At Pauline Shah, we answer questions about this process every day. Give us a call: 925-895-4155.