What to Avoid During a Home Purchase

What's better than getting a bunch of new furnishings to adorn your future home? Not much. But buying big ticket items before your loan closes can be harmful. It's best to remember that until your keys are in hand, your lender is watching your accounts very closely. We have listed some things below we suggest you avoid when waiting for your loan to close.

Don't buy big-ticket items. Although you will be dreaming of ways to turn your new house into a castle, avoid major purchases like appliances, electronics, or expensive furnishings. We also recommend that you avoid vacations and car purchases until your loan closes. Your lender may send up red flags if you buy your furniture on your credit cards in the middle of your loan process. Using cash to buy big-ticket items can also create a problem: many lending institutions take into consideration your available cash when approving your loan.

Don't go on a career search. Consistency in your work history is a good thing to banks and other lenders. Changing jobs may not affect your ability to qualify for a mortgage loan - especially if you are improving your salary. But for some people, changing jobs during the mortgage approval process may raise concern and stymie your approval.

Don't switch banks or move finances around in your bank accounts. While the lender reviews your mortgage package, you will likely be asked to produce bank statements for recent months for your checking accounts, savings accounts, money market accounts and other liquid wealth. To eliminate potential fraud, most lenders want detailed paperwork to verify the source of all funds. No matter the reason, moving banks or transferring funds may raise a red flag with the lender and impede your loan process.

Don't give a "good faith" deposit directly to the seller in a FSBO (for sale by owner) purchase. Your earnest money does not belong to the seller: it is actually yours until the sale closes. Although your seller may not realize this, your good faith funds must be applied to the buyer's closing expenses. Get an attorney or other neutral person who can hang on to the funds or place them in a trust account until closing. Should your home purchase fail, your purchase agreement should indicate to whom the earnest money should go.

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can walk you through the pitfalls of getting a mortgage. Give us a call at (808) 935-0678.

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