Things to Avoid While Purchasing a New Home

What's better than buying a bunch of new furniture to adorn your new home? Not much. But purchasing big-ticket items before closing could be trouble. It's wise to remember that until you get the keys, your lender is watching your accounts very closely. Here are some things to refrain from before closing to assure the transaction goes well.

Don't buy big-ticket items. You may be itching to buy that new sofa for the soon-to-be-yours family room, but it's best to stay away from making big ticket purchases like furniture, appliances, jewelry, or vacations until your home loan closes. Your credit numbers could be altered suddenly if you make a huge purchase using plastic. Because lenders are looking closely at your bank accounts, a large cash purchase is also not advised.

Don't go on a job hunt. Lenders look for a consistent job history on your paperwork. Finding a new career (particularly one with a better salary) may not jeopardize your ability to qualify for a loan. However, if you switch careers before approval, your loan process could fail or be bogged down.

Don't move cash around or switch banks. As your lender reviews your mortgage loan application, you will likely be instructed to provide bank statements for recent months for your checking and savings accounts, money market accounts and other liquid finances. In order to detect fraud, lenders look for clear documentation of how you earn your living and where additional money comes from. No matter the purpose, moving banks or transferring money could raise a red flag with your lender and slow down your application process.

Don't give cash directly to your seller (usually in cases of "for sale by owner") for a "good faith" deposit. Until the sale is complete, the good faith deposit actually belongs to you. Some FSBO sellers may not realize that this earnest money must be used for your expenses upon closing. We recommend that you put the deposit into a trust account, or get a neutral party, like a lawyer, to hold it until the closing of the sale. The disposition of good faith funds, if your home purchase fails, should be documented in the purchase agreement with the seller.