What to Avoid During your Home Purchase
What's more fun than buying a bunch of new furnishings to go in your future home? Not much. But making big purchases before your loan closes can be harmful. There are still a few major hurdles to jump before the house is realy yours. Below you'll find a list of things to stay away from during this crucial time of your home purchase.
Don't make expensive purchases. Although you will be dreaming of ways to turn your new home into a castle, try to stay away from major purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and car purchases until the closing of your loan. Financing new stainless steel appliances with a store card or a bank credit card could jeopardize your credit worthiness when you need it the most. Using cash to purchase expensive items can also be a mistake: most lending institutions look at your cash reserve when approving your mortgage.
Don't go on a career search. Lending Institutions feel comfortable seeing a consistent work history on your paperwork. Getting a new career before you start the application process for a mortgage loan may not get in the way of your approval at all. However, switching careers in the middle of your loan process may affect your approval.
Don't take your accounts to a new bank or move around your finances. As your lending institution considers your mortgage loan application, you will probably be instructed to submit bank statements for the last few months for your checking accounts, savings accounts, money market funds and other liquid finances. In order to detect fraud, lenders will need a consistent portrayal of how you earn your money and where additional money comes from. No matter the purpose, changing banks or moving funds from one account to another could raise a red flag with your lender and impede your loan process.
Don't give funds directly to your seller (generally in cases of "for sale by owner") to be used as earnest money. Until closing, any good faith money actually belongs to you. Although your FSBO seller might not understand this, your good faith money should be used for your closing expenses. We recommend that you put the funds into a trust account, or get a neutral person, like a lawyer to hold them until the deal closes. If your home purchase fails, the contract with the seller should document to whom your earnest money should go.
Community Trust Lending Team at Norcom Mortgage-NMLS ID#71655 can walk you through the pitfalls of getting a mortgage. Call us at (203) 526-9345.