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Buyer Don'ts
Things to Avoid as You Buy Your Home
What mistake do many homebuyers make as soon as the ink is dry on the purchase agreement? They rush out to buy things to fill up their new home often before the lender approves their loan. Unfortunately, they usually do not realize that there are still major hurdles to overcome before the seller hands over the house keys. Here is what you want to avoid during the home buying process to assure your transaction goes as smoothly as possible:
- Don’t make any big purchases. It’s tempting to order that new sofa for your new living room, but its best to avoid making major purchases such as: furniture, cars, appliances, electronic equipment, jewelry, or vacations until after the closing. Financing that furniture with a credit card could jeopardize your credit worthiness during the time it means the most. Even using cash to purchase big items can also create a problem because many lenders take your cash reserve into consideration when approving a mortgage. You might get to closing only to learn that the lender is un-approving your loan because your debts and savings accounts have changed.
- Don’t switch jobs. Lenders like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan - unless you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concerns and affect your application. Some employers will require a probation period after you start a new job, and, therefore, will not commit in writing to how long they expect to keep you in your new position. Consequently, switching jobs during the loan process might result in the denial of your loan.
- Don’t switch banks or move money around. As the lender’s underwriter reviews your loan package, you will likely be asked to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account - even if its just to consolidate funds - could make it difficult for the lender to document your funds.
- Don't give an earnest money deposit directly to the seller in a for sale by owner purchase. As a rule, your earnest money deposit belongs to you, not to the seller, until the transaction closes. Your for sale by owner (FSBO) seller may not know that your earnest money should be applied to your expenses at closing. Get an attorney or other neutral party who can hold the deposit or put it in a trust account until you close on the home. Your purchase contract should dictate to whom the funds go should the transaction fall through.
- Don’t disregard your lender's requirements. You may have been pre-approved for the loan but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, W2s and other paperwork. It is up to you to get it to him or her as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home. Be sure you get the required documents to your loan officer as soon as possible. Some buyers relax because their loan officer said they were pre-approved. Pre-approval doesn’t mean you don’t have to follow through on the details.
