What to Avoid During a Home Purchase
In the rush of excitement that comes with an accepted offer and a "yes" from the lender, many homebuyers make the error of taking their enthusiasm straight to the mall or furniture store. There are still a few major hurdles to jump before your loan closes. Here are some things to refrain from during the home buying process to be sure your transaction goes smoothly.
Don't empty your wallet on big-ticket items You may be itching to order that new Turkish rug for the soon-to-be-yours living room, but it's best to avoid making major purchases like furniture, appliances, jewelry, or cars until your home loan closes. Your lender may send up red flags if you buy new appliances on your credit cards during your loan process. It's even a bad idea to make those large purchases using cash. Lending Institutions are looking at your cash on hand when considering your loan.
Don't get a new career. Your recent work history should show consistency. Getting a new job before you start the application process for a mortgage loan may not affect your approval at all. However, switching careers in the middle of the approval process may affect your approval.
Don't switch your accounts to a new bank or move around your finances. Your lender will ask for recent bank statements for accounts in your name: checking, savings, money market, and other liquid assets. The lending institution is looking for a consistent flow of your money each month, in the interest of ruling out fraud. Even for practical reasons, moving around funds or switching banks could make it more difficult for your lending institution to document your account history.
Don't give money directly to your seller (generally in cases of "for sale by owner") for earnest money. Your good faith deposit does not belong to the seller: it remains yours until the sale closes. Your good faith money is to go toward your expenses upon closing; the FSBO seller may not know this. Find a lawyer or other neutral person who will hang on to the money or put it in a trust account until closing. The contract should specify who keeps the earnest funds if the transaction does not go through.
At Alerus Mortgage, we answer questions about this process every day. Give us a call at 952 417 8481.