Things to Avoid While Buying a Home
What's better than getting a bunch of new furnishings to adorn your future home? Nothing. But making big ticket purchases before your loan closes could be trouble. There are still a few major hurdles to jump before the house is realy yours. Here are some actions to stay clear of before closing to assure your transaction goes smoothly.
Don't empty your wallet on big-ticket items You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new dream home, but stay away from expensive purchases like furniture, jewelry, appliances, or vacations until closing. Your credit numbers could be altered suddenly if you make a huge purchase using credit cards. Since lenders are reviewing your financial accounts, a large cash purchase is also a mistake.
Don't get a new career. Stability in your work history is a positive thing to banks and other lenders. Changing jobs may not affect your ability to qualify for a loan - particularly if you are getting a better salary. But in some cases, changing jobs during the loan approval process might raise concern and stymie your application.
Don't switch banks or move cash around in your accounts. Your lending institution will require you to submit recent bank statements of accounts in your name: savings, checking, money market, and other assets. To eliminate fraud, lenders need clear documentation of how you earn your living and where additional money comes from. Switching banks or transferring finances elsewhere - even if its just to pool funds - could make it harder for the lender to review your funds.
Don't give cash directly to your seller (commonly in cases of "for sale by owner") to be used as a "good faith" deposit. Until the sale is complete, any earnest money actually belongs to you. Some FSBO sellers might not realize that any good faith funds must be used for your expenses upon closing. It's best to put the funds into a trust account, or get a neutral person, like an attorney to hold them until the closing of the sale. Should your home purchase fail, your purchase agreement should document to whom the good faith funds should go.
MOST IMPOTANTLY - Do not open any new debt accounts (i.e. credit cards, auto loans, etc...), without first speaking to your loan originator We typically only need the one initial credit report for the loan process. After we pull the initial report, only the accounts that are reported will be used for qualifying without having to pull an updated report or refresh the original report. However, the lenders will receive an alert if there are any new inquires that pop up after the initial credit report was pulled. We have had past experiences where a few days before closing customers get anxious and go out and buy a bunch of furniture and appliances for their new home. To pay for these new items, they will open a store credit card. That then triggers an alert to the lender, which makes them come back and ask about the new inquiry. We've had customers who no longer qualify with the new accounts minimum payment, and they have had to return all the items they just purchased and delay the closing. So always check with your loan originator before opening any new accounts, especially after the initial credit report has been pulled.
At Contemporary Mortgage Services, Inc, we answer questions about this process every day. Give us a call at 407-834-3377.