Tips When Buying Your New Home
What not to do when purchasing a home.
What to be careful about when you are in contract to buy a home.
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What Not to Do When in the Middle of Purchasing a Home.
In the rush of excitement that comes with an accepted offer to buy and a home loan approval from the lender, some Homebuyers make the error of carrying their enthusiasm straight to the mall or appliance store. There still are major hurdles to jump through before your loan closes and you actually own the home. Here are some actions to stay clear of before closing to be sure your transaction goes well and closes on time.
• Don't buy Big-Ticket items while your loan is in process. Although you may be dreaming of ways to turn your new house into a castle, avoid big-ticket purchases like appliances, electronics, or furniture. You will also want to stay away from vacations and vehicle purchases until your loan closes. You will send up red flags with your lender if you finance new appliances on your credit cards during your loan process. Using cash to purchase big items can also be an issue: most lending institutions look at your available cash when approving your mortgage. Buying a car in the middle of the transaction has killed more deals than you can imagine.
Lenders require that you have enough money for your down payment and a couple of months of payments left in your bank account, and they will verify this right before you close escrow and if the money has been moved or is not there anymore your loan could become denied. Not to mention if you use a credit card this could reduce your credit score or increase your debt-to-income ratio to the point you no longer qualify. So DO NOT do anything with your finances while you are waiting for your home loan to close without the advice from Loan Officer.
Don't be fooled by the "Buy Now Pay Later" companies out there. Although you might be able to buy a piece of furniture today and pay for it 12-18 months later your credit will be checked to see if you qualify for their deal. This will not only alert the lender that you have purchased something that could potentially disqualify you from buying your home it could also lower your credit score enough to disqualify you as well.
• Don't Change your Job. Consistency in your work history is a positive thing to lending institutions. Getting a new job may affect your ability to qualify for a mortgage loan - even if you are improving your salary situation. If you do switch careers before final loan approval, your mortgage could be denied. Always confirm with your Loan Officer before changing anything with your employment, that includes getting a raise.
• Don't move money around or change banks. As the lending institution considers your mortgage loan package, you will be asked to produce bank statements for recent months on your checking accounts, savings accounts, money market accounts and other liquid wealth. Your lending institution needs to see a consistent flow of your money over the pay period, in the interest of avoiding fraud. Switching banks or transferring money elsewhere - for whatever purpose - may make it harder for your lender to document your funds. Lenders will also require an explanation for any "Large Deposits". A Large Deposit is anything over $250.00, so be mindful of all your transactions and be prepared to explain any large deposits you have made over the last several months.
• Don't give funds directly to the seller. Your good faith deposit or Earnest Money Deposit (EMD) does not belong to the seller: it remains yours until the sale closes. Some For Sale by Owner (FSBO) Sellers might not realize that these good faith funds are to be used for your expenses upon closing and should be held in an escrow account. Find an Escrow or Title company, who is able to hold the funds or put them in a trust account until closing. Should your home purchase fail, your purchase contract should dictate to whom the good faith deposit should go? By using the services of one our Licensed Agents we will take care of that function for you. • Don't do work on the house prior to the close of escrow. If you enter a house without permission it is trespassing and you could be prosecuted. If you put your money into work on a home and something happens where you can't purchase the home you will lose that money. Also, there is no insurance, in your name, on that home, so if something happens to the house while working on it, you could be sued by the seller. An Agent should never give you permission to work on a house prior to it transferring to your name and the proper insurances are in place.
- Don't Move into the property prior to owning it. If you move into the property prior to owning the home you will have to wait 6 months before your lender will allow a loan to close. Most Agent's are not aware of this so do not let this be an option to occupy the home prior to owning it.
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