Things to Avoid While Purchasing a Home

What's more fun than buying a bunch of new furniture to adorn your future home? Not much. But buying big ticket items before your loan closes can be an error. It's best to remember that until closing, your lender is watching your finances very closely. We have listed some things below we suggest you avoid when waiting for your loan to close.

Don't overspend on big-ticket items It may be tempting to buy that new couch for the soon-to-be-yours living room, but it's advisable to stay away from making large buys like furniture, appliances, electronic equipment, or vacations until closing. Your credit numbers could change suddenly if you make a huge purchase using plastic. Since lenders are looking closely at your bank accounts, a large cash purchase is also a bad idea.

Don't look for a new career. Your recent career history should show consistency. Finding a new job (particularly one with a bigger salary) may not jeopardize your ability to qualify for a mortgage. However, if you switch careers before your loan is approved, your process could fail or be bogged down.

Don't move cash around or switch banks. Bank statements from the last few months for accounts in your name (savings, checking, money market, and other accounts) will be studied as the lending institution considers your approval. In order to detect fraud, lenders need clear documentation of how you earn your money and where any additional wealth comes from. No matter the reason, switching banks or moving money from one account to another may raise a red flag with the lender and impede your approval process.

Don't give money directly to your seller (commonly in the case of of "for sale by owner") to be considered a "good faith" deposit. As a rule, your good faith money is yours, not the seller's up until closing. Although some individual sellers might not understand this, the earnest money should be used for your closing expenses. It's best to put the funds into a trust account, or get an attorney to hold them until the closing of the sale. The purchase agreement should indicate to whom the money goes if the transaction fails.

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

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