What to Avoid During a Home Purchase

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With the thrill that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of carrying their enthusiasm straight to the mall or appliance store. There still remain a few major hurdles to jump before the keys are handed over. Here are some things to refrain from during the home buying process to assure your transaction goes well.

Don't empty your wallet on big-ticket items You may be itching to turn your new kitchen into a showplace, or celebrate your new castle, but stay away from expensive purchases like furniture, jewelry, appliances, or vacations until your loan closes. You may send up red flags with your lender if you buy your electronics on your credit cards in the middle of your loan process. It's even a red flag to make those huge purchases using cash. Lenders are looking at your available cash when considering your loan.

Don't look for a new job. Your recent work history should show stability. Getting a new career before you apply for a loan may not jeopardize your approval at all. However, switching careers in the middle of the application process may affect your approval.

Don't move money around or change banks. Most lenders will instruct the submission of recent bank statements of your accounts: checking, savings, money market, and other assets. To eliminate fraud, lenders want to see a consistent portrayal of how you earn your living and where additional funds come from. Even for innocent reasons, moving around funds or changing banks may make it harder for the lender to verify your bank history.

Don't give funds directly to your seller (commonly 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 sale closes. Some sellers may not know that the good faith money must be applied to your expenses at closing. An attorney or other type of neutral party can hold onto your funds, or you may place them temporarily into a trust account until closing. The purchase contract should indicate who keeps the earnest funds if the transaction falls through.

At James M Dix (NMLS 135621), we answer questions about this process every day. Give us a call at 317-773-0606.