What Not to Do When Purchasing a New House
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What's more fun than buying a bunch of new stuff to adorn your future home? Not much. However, making large purchases prior to your loan closes could be trouble. Until closing, there are still some hurdles to jump. We have listed some things below you will want to avoid when waiting for closing.
Don't make expensive purchases. It may be tempting to order that new easy-chair for the soon-to-be-yours living room, but it's best to avoid making major purchases like furniture, appliances, jewelry, or vacations until closing. Your lender may send up red flags if you purchase new appliances on your credit cards in the middle of your loan process. Using cash to purchase big items can even be an issue: many banks take into consideration your cash reserve when approving your mortgage.
Don't go on a career hunt. Lenders feel comfortable seeing a consistent career history on your application. Changing jobs may not affect your ability to qualify for a mortgage loan - especially if you are getting a bigger paycheck. But in some cases, switching jobs during the mortgage application process might bring concern and stymie your approval.
Don't take your accounts to a new bank or move around your money. Most lenders will instruct the submission of recent bank statements on your accounts: checking, savings, money market, and other liquid assets. The lending institution looks for a consistent rise and fall of your money over the pay period, in order to rule out fraud. No matter the purpose, switching banks or transferring funds could raise a red flag with your lender and slow down your application process.
Don't hand over earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your good faith deposit does not belong to the seller: it is actually yours until the sale closes. Although some individual sellers may not know this, your earnest money should be applied to your closing expenses. Find a lawyer or other neutral party who will hang on to the deposit or place it in a trust account until closing. The disposition of good faith money, if your sale falls through, should be specified in the contract with the seller.
American Financial Solutions, Inc. can answer questions about these "Don'ts" and many others. Give us a call: 773-755-9200.