What to Avoid During a Home Purchase

In the rush of excitement that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of taking their enthusiasm straight to the mall or appliance store. There are still a few major hurdles to jump before your loan closes. We have given you a list of actions below we suggest you stay away from when waiting for your loan to close.

Don't throw your money around. Although you may be planning ways to turn your new home into a showplace, avoid major purchases like appliances, electronics, or expensive furnishings. You will also want to avoid vacations and car purchases until the closing of your loan. Financing your Plasma TVs with a store card or a bank credit card could put your credit worthiness at risk during the time it means the most. Using cash to buy big-ticket items can also be a bad idea: many lenders take into consideration your cash reserve when approving your mortgage.

Don't get a new career. Lending Institutions look for a consistent job history on your application forms. Getting a new job may not affect your ability to qualify for a loan - especially if you are improving your salary. However, if you switch careers before your loan is approved, your process could fail or be bogged down.

Don't take your accounts to a new bank or move around your cash. Bank statements from recent months for your accounts (checking, savings, money market, and other accounts) will be reviewed as the lending institution makes decisions regarding your approval. Your lending institution looks for a steady rise and fall of your funds over the pay period, in order to rule out fraud. Even for practical reasons, transferring finances or changing banks might make it more difficult for the lending institution to confirm your account history.

Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. Until the completion of the deal, any good faith deposit actually belongs to you. Although your FSBO seller might not know this, any good faith money must be used for your closing expenses. Find an attorney or other neutral party who can hold the deposit or place it in a trust account until closing. Should your home purchase fail, your contract with the seller should document to whom your good faith funds should go.

American Commerce Mortgage can answer questions about these "Don'ts" and many others. Give us a call: 714-970-9700.

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