Things to Avoid While Purchasing a Home

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In the rush of excitement that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of carrying their enthusiasm straight to the mall or furniture store. There are still a few major hurdles to jump before the house is really yours. We have listed some actions below you will want to stay away from when waiting for your loan to close.

Don't buy luxury items. You may be itching to turn your new living room into a home magazine cover, or celebrate your new castle, but stay away from big purchases like furniture, jewelry, appliances, or vacations until your loan closes. Your credit numbers could change suddenly if you purchase new furniture using plastic. Since lenders are looking closely at your financial accounts, a large cash purchase is also a mistake.

Don't look for a new job. Consistency in your career history is a good thing to lending institutions. Getting a new career before you start the application process for a mortgage may not compromise your approval at all. However, if you switch careers before your loan is approved, your process could fail or be stalled.

Don't change banks or move money around in your bank accounts. Bank statements from the last few months for accounts in your name (savings, checking, money market, and other accounts) will likely be reviewed as the lending institution considers your application. To avoid fraud, lenders require clear documentation of how you earn your money and where additional wealth comes from. Even for innocent purposes, moving around cash or switching banks could make it harder for your lending institution to confirm your account history.

Don't give your FSBO (for sale by owner) seller earnest money, delivered to his door. Your good faith deposit does not belong to the seller: it is actually yours until the sale closes. The good faith funds are to go toward your expenses upon closing; some sellers may not understand this. You'll want to put the deposit into a trust account, or get a neutral party, like a lawyer, to hold it until closing. The purchase agreement should indicate who keeps the deposit if the transaction falls through.

Paul M. Johnson - Mortgage Banker can answer questions about these "Don'ts" and many others. Call us at 512-326-2186.