What to Avoid During a Home Purchase
Many new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller says "yes" and the loan is approved. Keep in mind that until your keys are in hand, your lender is watching you very closely. Here are some actions to stay clear of during the home buying process to assure the transaction goes well.
Don't overspend on big-ticket items Although you will be listing ways to turn your new house into a showplace, try to stay away from major purchases like appliances, electronics, or furniture. You will also want to avoid vacations and vehicle purchases until the closing of your loan. Using plastic to buy furniture could jeopardize your loan process by distorting your numbers. Because lending institutions are perusing your bank accounts, a large cash purchase is also a mistake.
Don't look for a new job. Your recent career history should show consistency. Getting a new career before you start the application process for a mortgage may not affect your approval at all. But for some people, changing careers during the loan approval process might raise concern and stymie your application.
Don't move money around or switch banks. Your lending institution will instruct the submission of recent bank statements of all of your accounts: savings, checking, money market, and other liquid assets. In order to eliminate fraud, lenders want to see clear documentation of how you earn your money and where additional wealth comes from. No matter the purpose, moving banks or transferring funds can raise a red flag with your lender and impede your approval process.
Don't give money directly to your seller (generally in the case of 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. The FSBO seller might not realize that this earnest money is to be used for your expenses upon closing. A neutral party, like an attorney can hang onto your earnest funds, or you may place them temporarily into a trust account until you close. Your purchase agreement should document who keeps the deposit if the home purchase falls through.
Alerus Mortgage can walk you through the pitfalls of getting a mortgage. Call us at 952 417 8481.