What to Avoid During your Home Purchase

With the thrill 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 furniture store. Until your keys are in hand, there are still some hoops to jump through. Below you'll find a list of actions to stay away from during this critical time of your home purchase.

Don't buy luxury items. Although you may be dreaming of ways to turn your new home into a showplace, try to stay away from major purchases like appliances, electronics, or expensive furnishings. We also recommend that you stay away from vacations and vehicle purchases until your loan closes. Using plastic to buy furniture could jeopardize your lending process by distorting your numbers. It's even a red flag to make those big-ticket purchases with cash. Lenders are examining your cash on hand when considering your loan.

Don't get a new job. Stability in your job history is a good thing to lenders. Getting a new career before you start the application process for a loan may not compromise your approval at all. But in some cases, switching jobs during the mortgage approval process might raise concern and hinder your approval.

Don't change banks or move finances around in your bank accounts. As the lending institution considers your mortgage loan application, you will probably be asked to submit bank statements for the last few months on your checking and savings accounts, money market funds and other liquid finances. In order to detect fraud, lenders need clear documentation of how you earn your living and where any additional funds come from. No matter the reason, moving banks or transferring funds may raise a red flag with the lender and slow down your loan process.

Don't give funds directly to your seller (usually in the case of of "for sale by owner") for earnest money. Your good faith deposit does not belong to the seller: it is actually yours until the transaction is final. The earnest money is to be applied to your expenses closing; some sellers may not realize this. A neutral party, like an attorney can hold onto your deposit, or you may put it temporarily into a trust account until closing. The final disposition of earnest funds, in the case of a failed transaction, should be indicated in the purchase agreement with the seller.