Dont's When Buying a Home

Lots of new homebuyers make the mistake of rushing out to buy things to fill their home as soon as the seller accepts their offer and the lender approves the loan. It's wise to remember that until closing, your lender is watching your finances very closely. Below you'll find a list of actions 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 kitchen into a home magazine cover, or celebrate your new dream home, but stay away from big purchases like furniture, electronics, appliances, or vacations until closing. Using plastic to buy new living room furniture could compromise your loan process by changing your numbers dramatically. Because lending institutions are looking closely at your financial accounts, a large cash purchase is also a bad idea.

Don't go job hunting. 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 your mortgage loan. But for some, switching jobs during the loan application process might raise concern and stymie your application.

Don't move cash around or switch banks. Your lending institution will ask for recent bank statements of your accounts: checking, savings, money market, and other liquid assets. To avoid fraud, lenders need a consistent portrayal of how you earn your money and where any additional money comes from. No matter the reason, moving banks or moving funds from one account to another can raise a red flag with the lender and slow your qualification process.

Don't give your FSBO (for sale by owner) seller earnest money, made out directly to him. As a rule, your good faith deposit is yours, not the seller's until closing. Your earnest money is to go toward your expenses closing; some sellers might not understand this. You'll need to put the funds into a trust account, or get a neutral person, like an attorney to hold them until the deal closes. The contract should document who keeps the earnest funds if the transaction falls through.