What to Avoid During your Home Purchase
Many new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller says "yes" and the lender approves their loan. There are still a few major hurdles to jump before your loan closes. Below you'll find a list of things to avoid during this critical time of your home purchase.
Don't throw your money around. You may be itching to turn your new kitchen into a showplace, or celebrate your new dream home, but keep away from expensive purchases like furniture, cars, appliances, or vacations until your loan closes. Your lender may send up red flags if you finance new furniture on your credit cards in the middle of your loan process. It's even a red flag to make those large purchases with cash. Lending Institutions are looking at your cash reserve when considering your loan.
Don't get a new career. Your recent work history should show consistency. Finding a new career (particularly one with a bump in salary) may not change your ability to qualify for your mortgage loan. But for some, changing careers during the mortgage approval process could raise concern and hinder your approval.
Don't move finances around or change banks. Most lenders will ask for recent bank statements for all of your accounts: savings, checking, money market, and other assets. To avoid potential fraud, most lending institutions want a thorough paper trail to verify the source of all cash. No matter the reason, moving banks or moving funds from one account to another could raise a red flag with the lender and slow down your qualification process.
Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. Your good faith money does not belong to the seller: it is actually yours until closing. Your seller may not know that the good faith funds must be used for your expenses at closing. An attorney or other type of neutral party can hold your earnest money, or you may put it temporarily into a trust account until you close. The contract should dictate to whom the money goes if the home purchase falls through.
At Norcal Capital Group, Inc, we answer questions about this process every day. Give us a call at (650) 689-5684.