What to Avoid During your Home Purchase

Many new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller says "yes" and the loan is approved. Keep in mind that until closing, your lender is watching your finances very closely. Here are some things to refrain from during the home buying process to be sure your transaction goes well.

Don't buy luxury items. You may be itching to turn your new kitchen into a home magazine cover, or celebrate your new dream home, but stay away from major purchases like furniture, jewelry, appliances, or vacations until closing. You may send up red flags with your lender if you purchase new appliances on your credit cards during your loan process. Using cash to purchase big-ticket items can also create a mistake: most lending institutions consider your cash reserve when approving your mortgage loan.

Don't go on a career search. Stability in your work history is a good thing to lenders. Getting a new job may not compromise your ability to qualify for a loan - particularly if you are improving your salary. However, switching jobs during the application process might affect whether or not you are approved.

Don't change banks or move cash around in your bank accounts. Bank statements from the last few months for your accounts (savings, checking, money market, and others) will be analyzed as the lending institution considers your approval. In order to avoid fraud, lenders look for clear documentation of how you earn your living and where additional money comes from. Switching banks or moving money to another account - for whatever reason - could hinder the documentation of your accounts.

Don't give a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your good faith deposit is yours, not the seller's until the deal closes. Your good faith money is to be used for your expenses upon closing; some sellers may not realize this. Find an attorney or other neutral party who will hang on to the funds or place them in a trust account until you close. The final disposition of earnest funds, in the case of a failed transaction, should be included in the contract with the seller.

At Metro Mortgage, we answer questions about this process every day. Give us a call: 866-300-1550.

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