What to Avoid During your Home Purchase

What's more fun than buying a bunch of new furnishings to go in your future home? Not much. But buying big ticket items before closing can be a misstep. There still remain a few major hurdles to jump before your loan closes. Here are some things to stay clear of before closing to assure your transaction goes smoothly.

Don't throw your money around. You may be itching to turn your new living room into a showplace, or celebrate your new castle, but keep away from expensive purchases like furniture, cars, appliances, or vacations until closing. Using plastic to buy new living room furniture could jeopardize your lending process by altering your numbers dramatically. Using cash to buy big items can even be a problem: most lending institutions look at your available cash when approving your mortgage.

Don't go on a career search. Your recent work history should show stability. Getting a new career before you start the application process for a mortgage may not compromise your approval at all. But for some, changing careers during the mortgage loan approval process might raise concern and affect your application.

Don't move finances around or switch banks. Bank statements from recent months for your accounts (savings, checking, money market, and other assets) will probably be studied as the lending institution considers your loan application. Your lender looks for a consistent flow of your money each pay period, in order to avoid fraud. Switching banks or transferring funds to another account - no matter the reason - could make it harder for your lender to verify your funds.

Don't give your FSBO (for sale by owner) seller a "good faith" deposit, delivered to his door. Until closing, any good faith deposit remains yours. Although some FSBO sellers may not understand this, any earnest money should be applied to your closing expenses. Get a lawyer or other neutral person who will hold the funds or place them in a trust account until you close. Should your home purchase fail, the purchase agreement should document to whom the earnest money should go.

At Norcal Capital Group, Inc, we answer questions about this process every day. Give us a call: (650) 689-5684.

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