Don't Trip Yourself up While Buying a New Home
What's better than getting a bunch of new furnishings to go in your future home? Not much. But making big purchases before closing could be trouble. It's wise to remember that until you get the keys, your lender is watching your finances very closely. We have listed some things below we suggest you avoid when waiting for closing.
Don't empty your wallet on big-ticket items You may be itching to order that new couch for the soon-to-be-yours den, but it's best to stay away from making major purchases like furniture, appliances, jewelry, or vacations until closing. Your lender may send up red flags if you buy new electronics on your credit cards in the middle of your loan process. Using cash to buy big-ticket items can even create a bad idea: most lending institutions consider your cash reserve when approving your loan.
Don't go on a job search. Your recent career history should show consistency. Getting a new job before you start the application process for a loan may not affect your approval at all. But in some cases, getting a new job during the mortgage loan application process may raise concern and hinder your approval.
Don't take your accounts to a new bank or move around your finances. Bank statements from recent months for accounts in your name (savings, checking, money market, and other assets) will be studied as the lending institution considers your mortgage application. To avoid potential fraud, most lenders require a thorough paper trail to verify the source of all cash. Even for innocent reasons, moving around finances or switching banks might make it more difficult for your lender to confirm your bank history.
Don't give funds directly to your seller (commonly in cases of "for sale by owner") to be used as earnest money. Your earnest money does not belong to the seller: it remains yours until closing. Your seller might not know that your good faith funds should be used for your expenses at closing. Find an attorney or other neutral person who is able to hang on to the money or put it in a trust account until you close. The final disposition of earnest funds, if your sale fails, should be specified in the purchase agreement with your seller.
At U.S.A. Lending, Inc., we answer questions about this process every day. Give us a call at 305-967-7200.