Things to Avoid While Buying a New Home
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What's more fun than buying a bunch of new furniture to go in your future home? Not much. But making big purchases before closing can be a mistake. Until your keys are in hand, there are still some hoops to jump through. Here are some things to stay clear of before closing to assure the transaction goes well.
Don't buy big-ticket items. You may be itching to turn your new living room into a home magazine cover, or celebrate your new dream home, but stay away from major purchases like furniture, jewelry, appliances, or vacations until the loan closes. You may send up red flags with your lender if you finance your electronics on your credit cards in the middle of your loan process. Because lending institutions are reviewing your financial accounts, a large cash purchase is also not advised.
Don't look for a new job. Stability in your work history is a positive thing to lenders. Getting a new career before you start the application process for a loan may not affect your approval at all. However, if you switch careers before approval, your process could fail or be stalled.
Don't switch your accounts to a new bank or move around your money. Most lenders will ask for recent bank statements for accounts in your name: checking, savings, money market, and other liquid assets. The lending institution is looking for a consistent rise and fall of your money over the pay period, in order to rule out fraud. Changing banks or transferring money elsewhere - for whatever purpose - could make it harder for the lender to document your funds.
Don't give your FSBO (for sale by owner) seller a "good faith" deposit, made out directly to him. As a rule, your good faith money belongs to you, not the seller up until the deal closes. Your good faith money is to go toward your expenses closing; the individual seller may not know this. Find a lawyer or other neutral party who is able to hang on to the money or put it in a trust account until closing. Should your sale fall through, your purchase contract should specify to whom this earnest money should go.
At Hanson Planning Group, we answer questions about this process every day. Call us: (303) 300-8601.