Things to Avoid While Buying a New Home

Some new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller says "yes" and the loan is approved. It's best to remember that until you get the keys, your lender is watching your finances very closely. Below you'll find a list of actions to avoid during this crucial time of your home purchase.

Don't make expensive purchases. Although you will be listing ways to turn your new house into a castle, try to stay away from big ticket purchases like appliances, electronics, or expensive furnishings. You will also want to stay away from vacations and car purchases until the closing of your loan. Financing your stainless steel appliances with a store card or a bank credit card could jeopardize your credit worthiness when you need it the most. Using cash to purchase big items can also create an issue: most lenders consider your cash on hand when approving your mortgage loan.

Don't go on a job search. Your recent work history should show stability. Getting a new job before you apply for a mortgage loan may not compromise your approval at all. However, if you switch careers before approval, your mortgage process could fail or be slowed down.

Don't move money around or switch banks. As the lending institution reviews your loan package, you will probably be required to submit bank statements for the last two or three months for your checking and savings accounts, money market accounts and other liquid assets. To eliminate fraud, lenders need a consistent portrayal of how you earn your money and where additional wealth comes from. No matter the reason, changing banks or moving money from one account to another might raise a red flag with your lender and slow your approval process.

Don't give money directly to your seller (commonly in cases of "for sale by owner") for earnest money. Until the completion of the deal, any good faith deposit actually belongs to you. Some FSBO sellers might not realize that the good faith funds is to be applied to your expenses at closing. A neutral party, like an attorney can hang onto your deposit, or you may put it temporarily into a trust account until you close. The disposition of earnest funds, in the case of a failed transaction, should be documented in the purchase agreement with your seller.

At Not Your Average Lender, we answer questions about this process every day. Give us a call at 9722039033.