Don't Trip Yourself up While Buying a Home
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With the thrill that comes with an accepted offer and a "yes" from the lender, many homebuyers make the error of bringing their enthusiasm straight to the mall or appliance store. It's wise to remember that until your keys are in hand, your lender is watching your finances very closely. Below you'll find a list of things to avoid during this crucial time of your home purchase.
Don't empty your wallet on big-ticket items Although you may be listing ways to turn your new house into a castle, try to stay away from major purchases like appliances, electronics, or expensive furnishings. We also recommend that you avoid vacations and vehicle purchases until your loan closes. Financing new furniture with a store card or a bank credit card could jeopardize your credit worthiness when you need it the most. Because lending institutions are examining your bank accounts, a large cash purchase is also not advised.
Don't go job hunting. Your recent work history should show stability. Finding a new job (especially one with a bump in salary) may not affect your ability to qualify for your loan. But for some people, getting a new career during the loan application process might bring concern and stymie your approval.
Don't move cash around or change banks. Your lending institution will instruct the submission of recent bank statements on accounts in your name: checking, savings, money market, and other assets. To eliminate fraud, lenders want to see a clear and consistent picture of how you earn your money and where any additional funds come from. Even for innocent purposes, moving around cash or switching banks may make it harder for your lender to confirm your bank history.
Don't deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your earnest money belongs to you, not to the seller up until closing. Although your seller may not know this, your earnest money should be applied to the buyer's closing expenses. A neutral party, like an attorney can hold your earnest funds, or you may put them temporarily into a trust account until you close. Should your home purchase fail, your contract with the seller should specify to whom this good faith deposit should go.
At JOANNE AHN, we answer questions about this process every day. Give us a call: 415-999-2439.