Things to Avoid While Purchasing a New Home
What's better than buying a bunch of new furniture to go in your future home? Not much. But buying big ticket items before closing can be a mistake. It's wise to remember that until you get the keys, your lender is watching you very closely. We have listed some actions below we suggest you avoid when waiting for your loan to close.
Don't throw your money around. You may be itching to turn your new living room into a home magazine cover, or celebrate your new dream home, but stay away from big purchases like furniture, jewelry, appliances, or vacations until closing. Your credit numbers could be altered suddenly if you purchase new furniture using credit cards. Using cash to buy big-ticket items can also be a bad idea: most lenders look at your cash reserve when approving your mortgage loan.
Don't get a new job. Consistency in your job history is a positive thing to lenders. Getting a new job may not compromise your ability to qualify for a mortgage loan - especially if you are improving your salary. However, if you switch careers before your loan is approved, your loan process could fail or be stalled.
Don't switch your accounts to a new bank or move around your cash. As your lender reviews your mortgage application, you will likely be instructed to produce bank statements for the last few months for your checking and savings accounts, money market funds and other liquid finances. The lender looks for a consistent rise and fall of your funds over the pay period, in the interest of ruling out fraud. 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 your FSBO (for sale by owner) seller a "good faith" deposit, cash in hand. Until the completion of the deal, any good faith money actually belongs to you. The good faith funds are to be used for your expenses closing; some sellers may not understand this. Get a lawyer or other neutral party who can hold the funds or put them in a trust account until closing. If your home purchase fails, your contract with the seller should document to whom your good faith deposit should go.
At Lighthouse Mortgage Company, we answer questions about this process every day. Call us at (916) 434-8915.