What to Avoid During a Home Purchase

What's more fun than buying a bunch of new furnishings to go in your future home? Not much. But making large purchases before your loan closes can be a misstep. Keep in mind that until you get the keys, your lender is watching your finances very closely. Here are some actions to refrain from during the home buying process to assure your transaction goes well.

Don't empty your wallet on 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 keep away from big purchases like furniture, cars, appliances, or vacations until closing. Your credit numbers could be altered suddenly if you purchase new furniture using credit cards. Using cash to buy big-ticket items can also create a mistake: many lending institutions consider your cash reserve when approving your loan.

Don't go on a career search. Consistency in your job history is a good thing to lenders. Getting a new job before you start the application process for a mortgage may not compromise your approval at all. However, if you switch careers before approval, your loan process could fail or be stalled.

Don't switch your accounts to a new bank or move around your cash. Bank statements from recent months for all of your accounts (savings, checking, money market, and other accounts) will likely be analyzed as the lending institution considers your mortgage application. To detect potential fraud, most lenders require detailed paperwork to determine the source of all funds. No matter the reason, switching banks or transferring money might raise a red flag with your lender and impede your approval process.

Don't give money directly to your seller (usually in the case of of "for sale by owner") for earnest money. Until closing, any good faith deposit remains yours. Your seller may not know that these good faith funds is to go toward your expenses upon closing. A neutral party, like an attorney can hold onto your earnest funds, or you may place them temporarily into a trust account until you close. The final disposition of good faith money, if your sale fails, should be written in the purchase agreement with your seller.

At American Commerce Mortgage, we answer questions about this process every day. Call us at 714-970-9700.

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