What to Avoid During your Home Purchase
With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of taking their enthusiasm straight to the mall or furniture store. Until your keys are in hand, there are still some hoops to jump through. Here are some things to avoid before closing to be sure the transaction goes smoothly.
Don't make expensive purchases. Although you will be listing ways to turn your new home into a castle, try to stay away from major purchases like appliances, electronics, or furniture. You will also want to avoid vacations and car purchases until your loan closes. You may send up red flags with your lender if you buy your appliances on your credit cards in the middle of your loan process. Using cash to purchase expensive items can even create a mistake: most banks take into consideration your available cash when approving your loan.
Don't go on a career search. Lenders feel comfortable seeing a consistent work history on your paperwork. Finding a new career (particularly one with a bump in salary) may not affect your ability to qualify for your mortgage loan. However, if you switch careers before you qualify, your mortgage process could fail or be bogged down.
Don't move finances around or change banks. Bank statements from the last two or three months for your accounts (checking, savings, money market, and other assets) will likely be analyzed as the lender makes decisions regarding your approval. To detect potential fraud, most loans want a detailed paper trail to document the source of all cash. Even for practical reasons, moving around money or changing banks could make it difficult for your lending institution to document your bank history.
Don't hand over a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your earnest money does not belong to the seller: it remains yours until the transaction is final. Although some FSBO sellers might not realize this, your good faith funds should be applied to your closing expenses. We recommend that you put the deposit into a trust account, or get an attorney to hold it until the closing of the sale. Should your sale fall through, the purchase agreement should document where this good faith funds should go.
At Farm Credit of the Virginias, we answer questions about this process every day. Call us: (800) 919-3276.