What to Avoid During a Home Purchase

What's more fun than buying a bunch of new furnishings to go in your future home? Not much. But making big purchases before your loan closes can be an error. There still remain a few major hurdles to jump before the house is really yours. Below you'll find a list of things to avoid during this critical time of your home purchase.

Don't overspend on big-ticket items You may be itching to turn your new living room into a home magazine cover, or celebrate your new dream home, but stay away from big purchases like furniture, cars, appliances, or vacations until the loan closes. Your credit numbers could change suddenly if you make a huge purchase using plastic. Using cash to buy big items can even be a bad idea: many lending institutions look at your available cash when approving your mortgage loan.

Don't go on a career search. Stability in your work history is a good thing to lenders. Finding a new career (especially one with a bump in salary) may not jeopardize your ability to qualify for your loan. But in some cases, changing careers during the mortgage loan approval process may raise concern and affect your approval.

Don't move cash around or change banks. As the lending institution reviews your mortgage package, you will likely be asked to produce bank statements for recent months for your checking and savings accounts, money market funds and other liquid wealth. To detect potential fraud, most lenders want a thorough paper trail to document the source of all funds. Even for innocent reasons, moving around cash or changing banks may make it harder for the lender to verify your account history.

Don't give a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your good faith money does not belong to the seller: it remains yours until the sale closes. Any earnest money is to be applied to your expenses upon closing; some individual sellers may not realize this. We recommend that you put the deposit into a trust account, or get a neutral party, like a lawyer, to hold it until closing. If your sale falls through, your purchase contract should specify to whom the earnest money should go.