What to Avoid During your Home Purchase
What's better than buying a bunch of new stuff to go in your future home? Not much. But making big purchases before closing can be a misstep. Keep in mind that until you get the keys, your lender is watching your finances very closely. Here are some things to avoid before closing to be sure the transaction goes well.
Don't buy big-ticket items. You may be itching to buy that new Turkish rug for the soon-to-be-yours den, but it's advisable to avoid making major buys like furniture, appliances, jewelry, or vacations until your home loan closes. Your credit numbers could be altered suddenly if you make a huge purchase using credit cards. Because lenders are perusing your financial accounts, a large cash purchase is also not advised.
Don't get a new job. Lending Institutions look for a consistent work history on your paperwork. Getting a new job may not jeopardize your ability to qualify for a mortgage loan - especially if you are getting a better salary. However, if you switch careers before your loan is approved, your process could fail or be stalled.
Don't move money around or switch banks. As your lending institution considers your mortgage loan package, you will likely be required to produce bank statements for the last few months for your saving and checking accounts, money market funds and other liquid assets. To eliminate potential fraud, most lenders need thorough paperwork to document the source of all funds. Switching banks or transferring money elsewhere - no matter the purpose - could hinder the documentation of your funds.
Don't give your FSBO (for sale by owner) seller earnest money, cash in hand. Your good faith money does not belong to the seller: it remains yours until the sale closes. Any good faith funds are to be applied to your expenses upon closing; the individual seller may not know this. A neutral party, like an attorney can hold your earnest money, or you may put it temporarily into a trust account until you close. The disposition of earnest funds, if your sale fails, should be included in the purchase agreement with the seller.
At Norcal Capital Group, Inc, we answer questions about this process every day. Give us a call: (650) 689-5684.