What to Avoid During your Home Purchase

With the thrill that comes with an accepted offer and a "yes" from the lender, many homebuyers make the error of carrying their excitement straight to the mall or furniture store. There still remain a few major hurdles to jump before your loan closes. Here are some things to stay clear of before closing to assure your transaction goes smoothly.

Don't buy big-ticket items. Although you will be planning ways to turn your new home into a showplace, avoid major purchases like appliances, electronics, or expensive furnishings. We also recommend that you keep away from vacations and vehicle purchases until the closing of your loan. Using credit cards to buy furniture could compromise your loan process by changing your numbers dramatically. It's even a red flag to make those large purchases with cash. Lenders are looking at your available cash when considering your loan.

Don't get a new job. Stability in your job history is a good thing to lenders. Finding a new career (especially one with a better salary) may not affect your ability to qualify for a loan. However, if you switch careers before approval, your loan process could fail or be stalled.

Don't move cash around or switch banks. Your lender will require you to provide recent bank statements of accounts in your name: checking, savings, money market, and other assets. In order to eliminate fraud, lenders need a consistent portrayal of how you earn your money and where additional funds come from. Switching banks or moving finances elsewhere - even if its merely to pool funds - could hinder the review of your accounts.

Don't give funds directly to your seller (generally in the case of of "for sale by owner") for earnest money. As a rule, your good faith deposit belongs to you, not to the seller until closing. Although your seller might not realize this, your good faith funds must be applied to the buyer's closing expenses. An attorney or other type of neutral party can hold onto your earnest money, or you may put it temporarily into a trust account until closing. Your purchase agreement should indicate where the funds go if the home purchase falls through.