What to Avoid During a Home Purchase

Lots of new homebuyers make the mistake of rushing out to buy new things for their home soon after the seller accepts their offer and the lender approves the loan. There still remain a few major hurdles to jump before closing. We have given you a list of actions below you will want to stay away from when waiting for closing.

Don't overspend on big-ticket items Although you may be dreaming of ways to turn your new house into a castle, try to stay away from major purchases like appliances, electronics, or expensive furnishings. We also recommend that you avoid vacations and vehicle purchases until your loan closes. Financing your Plasma TVs with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Since lending institutions are reviewing your bank accounts, a large cash purchase is also not advised.

Don't go job hunting. Your recent job history should show consistency. Getting a new job may not jeopardize your ability to qualify for a loan - especially if you are getting a better salary. But for some people, changing jobs during the mortgage approval process might bring concern and affect your application.

Don't move finances around or change banks. Bank statements from the last few months for all of your accounts (savings, checking, money market, and other assets) will be analyzed as the lender makes decisions regarding your approval. In order to eliminate fraud, lenders require clear documentation of how you earn your living and where any additional funds come from. Even for innocent purposes, transferring money or changing banks might make it more difficult for your lending institution to verify your account history.

Don't give funds directly to your seller (generally in the case of of "for sale by owner") to be used as earnest money. As a rule, your good faith money is yours, not the seller's up until closing. Although your seller might not understand this, any good faith money should go toward the buyer's closing expenses. An attorney or other type of neutral party can hang onto your deposit, or you may put it temporarily into a trust account until closing. The contract should document where the funds go if the home purchase does not go through.