What to Avoid During a Home Purchase
In the rush of excitement that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of taking their enthusiasm straight to the mall or appliance store. There still remain a few major hurdles to jump before the house is realy yours. Below you'll find a list of actions to stay away from during this critical time of your home purchase.
Don't throw your money around. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new castle, but keep away from expensive purchases like furniture, cars, appliances, or vacations until your loan closes. Your lender may send up red flags if you buy new electronics on your credit cards during your loan process. Since lending institutions are perusing your financial accounts, a large cash purchase is also not advised.
Don't go on a career search. Your recent job history should show consistency. Finding a new career (particularly one with a bump in salary) may not hinder your ability to qualify for your loan. However, if you switch careers before you qualify, your mortgage process could fail or be bogged down.
Don't move finances around or change banks. As the lender considers your mortgage package, you will likely be asked to submit bank statements for recent months for your saving and checking accounts, money market accounts and other liquid assets. To detect potential fraud, most lenders want a detailed paper trail to document the source of all funds. Changing banks or moving money to another account - for whatever purpose - might make it difficult for your lender to document your funds.
Don't deliver a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Until the completion of the deal, the good faith deposit remains yours. Some FSBO sellers may not know that the good faith funds is to be used for your expenses upon closing. A neutral party, like an attorney can hang onto your earnest money, or you may put it temporarily into a trust account until closing. The disposition of good faith funds, in the case of a failed transaction, should be specified in the contract with your seller.
At Alerus Mortgage, we answer questions about this process every day. Call us: 952 417 8481.