Things to Avoid While Purchasing a Home

What's more fun than buying a bunch of new furniture 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 given you a list of things below you will want to avoid when waiting for your loan to close.

Don't make expensive purchases. You may be itching to order that new couch for the soon-to-be-yours parlor, but it's best to stay away from making large purchases like furniture, appliances, jewelry, or vacations until closing. Financing your stainless steel appliances with a store card or a bank credit card could jeopardize your credit worthiness during the time it means the most. Using cash to buy big-ticket items can even be a problem: many banks consider your cash on hand when approving your loan.

Don't get a new job. Lenders like to see a consistent career history on your application. Getting a new career before you start the application process for a mortgage may not get in the way of your approval at all. However, switching careers in the middle of the approval process could affect whether or not you are approved.

Don't move cash around or switch banks. Bank statements from the last few months for accounts in your name (checking, savings, money market, and other accounts) will be studied as the lending institution makes decisions regarding your approval. Your lending institution looks for a steady flow of your funds each pay period, in order to rule out fraud. No matter the reason, changing banks or transferring money might raise a red flag with the lender and impede your loan process.

Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. Your earnest money does not belong to the seller: it is actually yours until the sale closes. Although your FSBO seller may not know this, your good faith funds should be applied to your closing expenses. Find a lawyer or other neutral party who will hold the funds or put them in a trust account until closing. The final disposition of earnest funds, if your transaction falls through, should be written in the purchase agreement with your seller.

Norcal Capital Group, Inc can answer questions about these "Don'ts" and many others. Call us: (650) 689-5684.

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