Don't Trip Yourself up While Buying a Home
What's more fun than getting a bunch of new furniture to adorn your future home? Not much. But buying big ticket items before your loan closes could be trouble. Keep in mind that until closing, your lender is watching your finances very closely. Here are some actions to avoid before closing to assure your transaction goes well.
Don't make expensive purchases. Although you will be listing ways to turn your new home into a castle, try to stay away from big ticket purchases like appliances, electronics, or expensive furnishings. You will also want to avoid vacations and vehicle purchases until your loan closes. You may send up red flags with your lender if you purchase your appliances on your credit cards in the middle of your loan process. Using cash to buy big-ticket items can even create a problem: most lenders look at your available cash when approving your mortgage loan.
Don't get a new career. Your recent work history should show consistency. Getting a new job before you apply for a mortgage loan may not jeopardize your approval at all. However, switching careers during the loan process may affect whether or not you are approved.
Don't take your accounts to a new bank or move around your money. While your lending institution considers your loan application, you will probably be instructed to produce bank statements for the last two or three months on your saving and checking accounts, money market funds and other liquid assets. To avoid potential fraud, most lending institutions want a detailed paper trail to document the source of all incoming funds. Even for practical purposes, moving around funds or changing banks may make it difficult for the lending institution to confirm your account history.
Don't deliver a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your good faith money does not belong to the seller: it remains yours until the sale closes. Some FSBO sellers might not know that your good faith funds is to go toward your expenses at closing. An attorney or other type of neutral party can hold your deposit, or you may put it temporarily into a trust account until closing. Your contract should indicate to whom the deposit goes if the transaction falls through.
At Norcal Capital Group, Inc, we answer questions about this process every day. Give us a call at (650) 689-5684.