What to Avoid During a Home Purchase

With the thrill that comes with an accepted offer and a "yes" from the lender, many homebuyers make the error of carrying their enthusiasm straight to the mall or furniture store. Until your loan closes, there still remain some hurdles to jump. Here are some actions to avoid before closing to assure your transaction goes well.

Don't throw your money around. Although you may be listing ways to turn your new house into a showplace, avoid major purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and vehicle purchases until your loan closes. Financing your bedroom furniture with a store card or a bank credit card could put your credit worthiness at risk when you need it the most. It's even a bad idea to make those huge purchases with cash. Lenders are looking at your cash on hand when considering your loan.

Don't get a new job. Your recent job history should show stability. Finding a new job (especially one with a bigger paycheck) may not affect your ability to qualify for your mortgage loan. However, if you switch careers before your loan is approved, your process could fail or be stalled.

Don't move cash around or change banks. As the lender reviews your mortgage loan application, you will probably be required to produce bank statements for the last few months for your checking and savings accounts, money market accounts and other liquid assets. The lender hopes to see a steady rise and fall of your funds each month, in order to rule out fraud. Even for innocent reasons, moving around money or switching banks may make it difficult for the lending institution to confirm your account history.

Don't give your FSBO (for sale by owner) seller earnest money, cash in hand. Your good faith money does not belong to the seller: it remains yours until closing. Some sellers might not know that this earnest money must be used for your expenses at closing. An attorney or other type of neutral party can hang onto your earnest funds, or you may put them temporarily into a trust account until you close. The disposition of good faith funds, in the case of a failed transaction, should be specified in the contract with the seller.

At First Community Bank of Central Al., we answer questions about this process every day. Call us at (334) 285-8850.

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