Things to Avoid While Purchasing a Home

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What's more fun than buying a bunch of new furnishings to adorn your future home? Not much. But buying big ticket items before your loan closes can be harmful. It's best to remember that until closing, your lender is watching your accounts very closely. Here are some actions to refrain from during the home buying process to assure your transaction goes smoothly.

Don't overspend on big-ticket items You may be itching to turn your new kitchen into a showplace, or celebrate your new dream home, but stay away from big purchases like furniture, jewelry, appliances, or vacations until your loan closes. Your credit numbers could change suddenly if you purchase new furniture using plastic. Using cash to purchase big-ticket items can also create a problem: most lenders look at your cash on hand when approving your application.

Don't look for a new career. Your recent work history should show stability. Changing jobs may not compromise your ability to qualify for a mortgage loan - especially if you are going to be making more money. But for some, changing jobs during the mortgage application process might raise concern and stymie your approval.

Don't switch banks or move cash around in your accounts. While the lender reviews your mortgage package, you will probably be instructed to produce bank statements for recent months on your saving and checking accounts, money market accounts and other liquid assets. To eliminate potential fraud, most lenders require detailed paperwork to determine the source of all cash. Even for practical purposes, transferring cash or switching banks could make it more difficult for the lending institution to document your account history.

Don't give your FSBO (for sale by owner) seller a "good faith" deposit, made out directly to him. As a rule, your good faith money is yours, not the seller's until the sale is final. Some FSBO sellers may not realize that any earnest money must go toward your expenses upon closing. We recommend that you put the deposit into a trust account, or get an attorney to hold it until the closing of the sale. If your sale falls through, your purchase contract should indicate where this good faith funds should go.

At Residential Mortgage Group, I answer questions about this process every day. Call me at 612.816.1511.