What to Avoid During your Home Purchase
What's more fun than buying a bunch of new furniture to go in your future home? Nothing. But buying big ticket items before your loan closes can be an error. Until the house is really yours, there still remain some hurdles to jump. Below you'll find a list of things to stay away from during this critical time of your home purchase.
Don't overspend on big-ticket items Although you will be dreaming of ways to turn your new house into a castle, avoid major purchases like appliances, electronics, or expensive furnishings. You will also want to keep away from vacations and car purchases until your loan closes. Financing new bedroom furniture with a store card or a bank credit card could jeopardize your credit worthiness when you need it the most. It's even a mistake to make those large purchases with cash. Lenders are examining your cash reserve when considering your loan.
Don't go on a job search. Lenders look for a consistent career history on your paperwork. Changing jobs may not affect your ability to qualify for a loan - particularly if you are getting a bigger paycheck. However, if you switch careers before you qualify, your loan process could fail or be bogged down.
Don't move cash around or change banks. Bank statements from recent months for accounts in your name (checking, savings, money market, and other accounts) will probably be analyzed as the lender considers your mortgage application. To avoid potential fraud, most loans need thorough paperwork to document the source of all incoming funds. No matter the reason, moving banks or moving money from one account to another can raise a red flag with your lender and slow your approval process.
Don't hand over a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your good faith deposit is yours, not the seller's up until the deal closes. Some sellers may not know that any earnest money must go toward your expenses at closing. An attorney or other type of neutral party can hold onto your earnest funds, or you may place them temporarily into a trust account until closing. Should your home purchase fail, the contract with the seller should document to whom this earnest money should go.
At Alerus Mortgage, we answer questions about this process every day. Call us at 952 417 8481.