Things to Avoid While Buying a New Home
Many new homebuyers make the mistake of rushing out to buy things to fill their home soon after the seller says "yes" and the lender approves the loan. It's best to remember that until your keys are in hand, your lender is watching your finances very closely. Below you'll find a list of things to avoid during this crucial time of your home purchase.
Don't buy big-ticket items. Although you will be planning ways to turn your new house into a showplace, avoid big ticket purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and vehicle purchases until the closing of your loan. Your lender may send up red flags if you purchase new appliances on your credit cards in the middle of your loan process. Because lenders are reviewing your bank accounts, a large cash purchase is also a mistake.
Don't go on a job search. Lending Institutions like to see a consistent career history on your paperwork. Getting a new job may not affect your ability to qualify for a mortgage loan - particularly if you are going to be making more money. However, if you switch careers before your loan is approved, your loan process could fail or be stalled.
Don't switch banks or move cash around in your bank accounts. As your lender considers your mortgage loan application, you will likely be required to submit bank statements for recent months on your checking accounts, savings accounts, money market accounts and other liquid wealth. To avoid fraud, lenders look for clear documentation of how you earn your money and where additional wealth comes from. No matter the purpose, switching banks or transferring money can raise a red flag with your lender and slow down your loan process.
Don't give money directly to your seller (usually in the case of of "for sale by owner") for earnest money. Until the sale is complete, any good faith deposit actually belongs to you. Although your seller may not realize this, the earnest money should be used for the buyer's closing expenses. An attorney or other type of neutral party can hold onto your earnest money, or you may put it temporarily into a trust account until you close. The disposition of good faith funds, if your home purchase falls through, should be documented in the contract with the seller.
Yamini Patel can walk you through the pitfalls of getting a mortgage. Give us a call: (832) 730-2000.