What to Avoid During your Home Purchase

What's better than getting a bunch of new furniture to adorn your future home? Not much. But buying big ticket items before your loan closes could be trouble. There are still a few major hurdles to jump before your loan closes. Below you'll find a list of actions to stay away from during this critical time of your home purchase.

Don't buy big-ticket items. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new castle, but stay away from major purchases like furniture, jewelry, appliances, or vacations until the loan closes. Financing your stainless steel appliances with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. It's even a mistake to make those big-ticket purchases with cash. Lending Institutions are looking at your available cash when considering your loan.

Don't go on a job search. Lenders like to see a consistent career history on your application forms. Getting a new job may not jeopardize your ability to qualify for a mortgage loan - particularly if you are getting a better salary. However, if you switch careers before you qualify, your loan process could fail or be stalled.

Don't change banks or move finances around in your accounts. Bank statements from the last two or three months for accounts in your name (checking, savings, money market, and other accounts) will be studied as the lender makes decisions regarding your mortgage application. The lender wants to see a consistent rise and fall of your funds over the pay period, in the interest of avoiding fraud. Switching banks or transferring finances to another account - even if its only to consolidate funds - might make it harder for the lender to verify your funds.

Don't give cash directly to your seller (commonly in the case of of "for sale by owner") to be used as earnest money. As a rule, your good faith money is yours, not the seller's until closing. Although your seller might not realize this, your good faith money must be applied to your closing expenses. An attorney or other type of neutral party can hold your earnest money, or you may put it temporarily into a trust account until closing. The final disposition of earnest money, in the case of a failed transaction, should be indicated in the contract with your seller.