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 buying big ticket items before closing could be trouble. It's wise to remember that until your keys are in hand, your lender is watching your finances very closely. Below you'll find a list of things to stay away from during this critical time of your home purchase.

Don't throw your money around. You may be itching to order that new couch for the soon-to-be-yours den, but it's best to stay away from making big ticket buys like furniture, appliances, electronic equipment, or vacations until closing. Using plastic to buy furniture could compromise your loan process by distorting your numbers. Using cash to buy big items can also create a problem: most lenders consider your available cash when approving your mortgage.

Don't go on a job search. Your recent work history should show consistency. Finding a new job (particularly one with a bigger paycheck) may not affect your ability to qualify for a mortgage. But for some people, changing jobs during the mortgage loan application process could raise concern and hinder your approval.

Don't switch your accounts to a new bank or move around your finances. Your lending institution will ask for recent bank statements of accounts in your name: savings, checking, money market, and other assets. Your lender hopes to see a steady flow of your funds over the month, in the interest of avoiding fraud. Even for practical purposes, transferring funds or switching banks may make it harder for the lender to document your bank history.

Don't give money directly to your seller (generally in the case of of "for sale by owner") for earnest money. As a rule, your good faith deposit belongs to you, not the seller up until the deal closes. Although some individual sellers may not understand this, any good faith funds should be used for the buyer's closing expenses. Find a lawyer or other neutral person who can hang on to the deposit or put it in a trust account until you close. The disposition of good faith funds, if your home purchase falls through, should be specified in the contract with the seller.

First Community Bank of Central Al. can answer questions about these "Don'ts" and many others. Give us a call: (334) 285-8850.

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