Dec

5 Things to Avoid When Purchasing a Home

Many new homebuyers make the mistake of rushing out to buy things to fill their home with as soon as the seller accepts their purchase offer and they have the pre-approval from the mortgage broker. But it’s not quite time to celebrate. Here are some things to avoid during the home buying process to assure your transaction goes as smoothly as possible:

No expensive purchases. It may be tempting to order that new sofa for your soon-to-be living room, but its best to avoid making major purchases like furniture, cars, appliances, electronic equipment, jewelry, or vacations until after the closing. Financing that furniture with a store credit card or even one of your own credit cards could negatively affect your credit score. Using cash to purchase big items can also create a problem because lenders will look at a two month average of your bank account balance to determine the amount of money you have in reserve.

Don’t change jobs. Lenders like to see a consistent job history, with no gaps in employment. Generally, changing jobs will not affect your ability to qualify for a mortgage – especially if you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concern and affect your application, or delay the transaction. In the case of a USDA Home Loan earning more money could put you over the income eligibility amount. Also keep in mind that lenders will want to ensure that your new job does not have a probation period. If you switch to a full commissioned or self employed then that income typically can not be used for qualification until you have a two year track record.

Don’t switch banks or move money around. During underwriting, you will likely be asked to provide bank statements for the last two months on your checking accounts, savings accounts, money market funds and other 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 FSBO purchase. As a rule, your good faith deposit belongs to you, not to the seller, until the deal closes. Your FSBO seller may not know that your good faith funds should be applied to your expenses at closing. Get a title company 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 mortgage brokers requirements. You may have been pre-approved for the loan but your work with is far from over. In order to process your loan, you need to meet certain requirements. Your mortgage broker will need copies of your bank statements, W2s and other paperwork. It is up to you to 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.