What Not to Do When Purchasing a New Home
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What's more fun than getting a bunch of new furniture to go in your future home? Not much. But making big-ticket purchases before your loan closes can be harmful. There are still a few major hurdles to jump before your loan closes. We have listed some things below you will want to avoid when waiting for closing.
Don't overspend on big-ticket items Although you will be dreaming of ways to turn your new house into a castle, try to stay away from big ticket purchases like appliances, electronics, or furniture. You will also want to avoid vacations and vehicle purchases until your loan closes. Your credit numbers could be altered suddenly if you make a huge purchase using credit cards. It's even a red flag to make those huge purchases using cash. Lenders are examining your cash reserve when considering your loan.
Don't go on a job search. Consistency in your career history is a good thing to banks and other lenders. Getting a new career before you start the application process for a loan may not affect your approval at all. However, if you switch careers before your loan is approved, your loan process could fail or be bogged down.
Don't take your accounts to a new bank or move around your cash. As your lender reviews your mortgage application, you will likely be asked to provide bank statements for the last few months on your saving and checking accounts, money market funds and other liquid finances. To avoid potential fraud, most lending institutions require thorough paperwork to verify the source of all funds. No matter the purpose, changing banks or moving funds from one account to another could raise a red flag with the lender and slow your loan process.
Don't give earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your good faith deposit does not belong to the seller: it remains yours until closing. The FSBO seller may not know that any good faith money should go toward your expenses at closing. An attorney or other type of neutral party can hang onto your funds, or you may place them temporarily into a trust account until closing. Should your sale fall through, the purchase agreement should specify to whom the earnest money should go.
Cason Home Loans can walk you through the pitfalls of getting a mortgage. Give us a call at 863-286-4824.