Dont's When Purchasing a New Home

With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of carrying their enthusiasm straight to the mall or furniture store. There still remain a few major hurdles to jump before the keys are handed over. Below you'll find a list of things to avoid during this crucial time of your home purchase.

Don't buy luxury items. Although you will be planning ways to turn your new house into a castle, avoid big ticket purchases like appliances, electronics, or expensive furnishings. You will also want to avoid vacations and car purchases until the closing of your loan. Using credit cards to buy furniture could compromise your loan process by distorting your numbers. It's even a bad idea to make those large purchases using cash. Lending Institutions are looking at your cash on hand when considering your loan.

Don't get a new career. Consistency in your career history is a good thing to lending institutions. Finding a new career (especially one with a bump in salary) may not jeopardize your ability to qualify for a mortgage. However, switching careers during the application process could influence your approval.

Don't switch banks or move money around in your bank accounts. Most lenders will require you to produce recent bank statements of accounts in your name: savings, checking, money market, and other assets. To avoid fraud, lenders will need clear documentation of how you earn your money and where additional wealth comes from. Even for innocent purposes, moving around funds or changing banks could make it difficult for the lender to document your account history.

Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your good faith money belongs to you, not the seller until the deal closes. The FSBO seller may not know that your good faith money is to be applied to your expenses upon closing. Find an attorney or other neutral person who is able to hold the funds or put them in a trust account until you close. Should your sale fall through, your contract with the seller should indicate to whom this good faith funds should go.