What to Avoid During a Home Purchase
What's more fun than getting a bunch of new furniture to adorn your future home? Nothing. But buying big ticket items before your loan closes can be an error. Keep in mind that until your keys are in hand, your lender is watching your accounts very closely. We have given you a list of things below we suggest you avoid when waiting for closing.
Don't make expensive purchases. It may be tempting to buy that new sofa for the soon-to-be-yours den, but it's best to stay away from making large buys like furniture, appliances, jewelry, or vacations until closing. Your lender may send up red flags if you finance your electronics on your credit cards in the middle of your loan process. It's even a bad idea to make those huge purchases using cash. Lenders are looking at your available cash when considering your loan.
Don't get a new job. Your recent career history should show stability. Getting a new job before you start the application process for a mortgage loan may not compromise your approval at all. However, switching careers during the application process may affect whether or not you are approved.
Don't switch banks or move money around in your accounts. While your lending institution considers your loan application, you will likely be required to produce bank statements for recent months on your checking and savings accounts, money market accounts and other liquid finances. To detect potential fraud, most loans need a thorough paper trail to verify the source of all cash. No matter the reason, switching banks or transferring money can raise a red flag with the lender and slow down your loan process.
Don't give cash directly to your seller (usually in the case of of "for sale by owner") for a "good faith" deposit. As a rule, your good faith deposit is yours, not the seller's up until closing. Your good faith money is to go toward your expenses upon closing; some sellers might not realize this. An attorney or other type of neutral party can hold your earnest funds, or you may place them temporarily into a trust account until you close. The disposition of good faith money, in the case of a failed transaction, should be indicated in the purchase agreement with your seller.
At Atlantic Financial Services, we answer questions about this process every day. Give us a call at (732) 969-9300.