What to Avoid During a Home Purchase
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Some new homebuyers make the mistake of rushing out to buy new things for their home soon after the seller accepts their offer and the lender approves their loan. Keep in mind that until your keys are in hand, your lender is watching you very closely. Below you'll find a list of things to stay away from during this critical time of your home purchase.
Don't buy luxury items. You may be itching to turn your new kitchen into a showplace, or celebrate your new castle, but stay away from major purchases like furniture, cars, appliances, or vacations until closing. You may send up red flags with your lender if you finance new furniture on your credit cards in the middle of your loan process. Using cash to purchase big-ticket items can also be a bad idea: most banks take into consideration your cash on hand when approving your mortgage loan.
Don't get a new job. Your recent job history should show consistency. 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, if you switch careers before your loan is approved, your process could fail or be slowed down.
Don't switch banks or move money around in your bank accounts. As your lending institution reviews your mortgage loan application, you will probably be instructed to submit bank statements for the last few months for your checking and savings accounts, money market funds and other liquid assets. Your lender hopes to see a steady flow of your funds over the pay period, in order to avoid fraud. No matter the reason, changing banks or transferring funds can raise a red flag with your lender and slow down your application process.
Don't deliver a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your good faith money does not belong to the seller: it remains yours until the sale closes. Although some FSBO sellers may not understand this, the good faith money should go toward your closing expenses. You'll need to put the money into a trust account, or get a neutral party, like an attorney, to hold it until closing. Should your sale fall through, the contract with the seller should indicate to whom your earnest money should go.
At Wisdom Financial, Inc., we answer questions about this process every day. Call us at 708.499.6088.