Things to Avoid While Purchasing a New Home
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What's more fun than getting a bunch of new furnishings to adorn your future home? Nothing. But buying big ticket items before your loan closes can be harmful. Keep in mind that until closing, your lender is watching your finances very closely. Below you'll find a list of things to stay away from during this critical time of your home purchase.
Don't make expensive purchases. You may be itching to turn your new kitchen into a showplace, or celebrate your new dream home, but stay away from major purchases like furniture, jewelry, appliances, or vacations until the loan closes. Using plastic to buy furniture could jeopardize your loan process by distorting your numbers. It's even a red flag to make those large purchases using cash. Lenders are looking at your available cash when considering your loan.
Don't go on a career search. Consistency in your career history is a good thing to banks and other lenders. Finding a new job (especially one with a bigger salary) may not hinder your ability to qualify for your mortgage. However, switching careers in the middle of the approval process could influence your approval.
Don't change banks or move finances around in your bank accounts. While your lending institution reviews your mortgage loan package, you will probably be instructed to submit bank statements for recent months for your checking accounts, savings accounts, money market funds and other liquid wealth. To eliminate potential fraud, most lenders require a detailed paper trail to verify the source of all cash. Changing banks or transferring finances elsewhere - for whatever reason - may make it harder for your lender to review your funds.
Don't give funds directly to your seller (generally in cases of "for sale by owner") for earnest money. As a rule, your good faith deposit belongs to you, not to the seller until closing. Although some individual sellers might not realize this, your good faith funds should be applied to the buyer's closing expenses. Get an attorney or other neutral party who will hold the funds or put them in a trust account until you close. The final disposition of good faith money, if your transaction falls through, should be included in the purchase agreement with the seller.
At Alerus Mortgage, we answer questions about this process every day. Give us a call at (612) 386-5901.