What to Avoid, During your Home Purchase
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Simply said...freeze your financial situation when you plan to buy a home. Some new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller accepts their offer and the lender approves their loan. Hold on, there still remains a few major hurdles to jump through before closing! Here are some actions to stay clear of before closing, to assure your transaction goes smoothly.
Don't empty your wallet on big-ticket items You may be itching to buy that new sofa for the soon-to-be-yours den, but it's advisable to avoid making major buys like furniture, appliances, jewelry, or cars until after your home loan closes, and you have the keys in your hand. You will send up red flags with your lender if you purchase your items on your credit cards in the middle of your loan process. Lenders monitor your credit all the time they are processing your loan, so if you buy something, or open a new account, they know about it immediately! Yes, you read this correctly, they monitor your credit...you charge something on your credit card, or open a new account, they are notified by the credit bureaus! A large cash purchase is also not advised because bank statements will need to be updated throughout the loan process as well. Technology at its finest!
Don't get a new job. Your recent job history should show stability. Getting a new job before you apply for a mortgage loan may not compromise your approval at all, as long as you do not tell your boss you are leaving, because they have to disclose if you are resigning on the verification of employment they receive. However, switching jobs during the approval process might affect your approval. Lenders will want to see that you have received your first pay stub prior to closing. You may have a 2 or 3 week delay before you receive that first pay stub, and that may not be until after your closing date...oops! AND, do not plan on retiring soon, make that decision after you close.
Don't move finances around or change banks. While the lending institution reviews your loan package, you will be asked to provide bank statements for the last two or three months for your saving and checking accounts, money market accounts and other liquid assets. The lending institution looks for a steady rise and fall of your money over the months, in order to rule out large cash deposits. Even for practical purposes, moving around finances or changing banks could make it more difficult and time consuming for you, and the lender, to verify your account history.
Don't hand over a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your earnest money does not belong to the seller: it is actually yours until closing. Your seller may not realize that this earnest money must go toward your expenses and down payment at closing. Find an attorney who is able to hold the funds and place them in an escrow trust account until you close. If your transaction fails, your purchase agreement should indicate to whom your good faith funds should go to. Keep your money safe!
Please call me today with any questions! Sherry Bitner, 941-504-1445, or email me at Sherry@SherryBitner.com