What to Avoid During your Home Purchase

With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of carrying their enthusiasm straight to the mall or appliance store. There still remain a few major hurdles to jump before your loan closes. Here are some actions to refrain from before closing to assure the transaction goes well.

Don't overspend 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 furniture. We also recommend that you avoid vacations and vehicle purchases until your loan closes. Your credit numbers could be altered suddenly if you purchase new furniture using credit cards. Because lenders are perusing your financial accounts, a large cash purchase is also a mistake.

Don't go on a job search. Your recent job history should show stability. Changing jobs may not affect your ability to qualify for a mortgage loan - especially if you are getting a better salary. But in some cases, switching jobs during the loan approval process could raise concern and hinder your approval.

Don't move finances around or switch banks. Most lenders will require you to submit recent bank statements for accounts in your name: savings, checking, money market, and other assets. To detect potential fraud, most lending institutions want a thorough paper trail to verify the source of all cash. No matter the purpose, moving banks or transferring funds could raise a red flag with the lender and slow your approval process.

Don't give funds directly to your seller (generally in cases of "for sale by owner") for earnest money. Your good faith money does not belong to the seller: it remains yours until the transaction is final. Although your FSBO seller may not know this, any good faith money should be used for the buyer's closing expenses. Find a lawyer or other neutral party who will hold the funds or put them in a trust account until you close. Should your sale fall through, your contract with the seller should specify to whom this earnest money should go.