What to Avoid During your Home Purchase

Many 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 best to remember that until closing, your lender is watching your accounts very closely. We have listed some things below you will want to stay away from when waiting for your loan to close.

Don't buy luxury items. Although you will be listing ways to turn your new home into a castle, try to stay away from major purchases like appliances, electronics, or expensive furnishings. We also recommend that you avoid vacations and vehicle purchases until the closing of your loan. 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. Because lending institutions are looking closely at your bank accounts, a large cash purchase is also a bad idea.

Don't go on a career search. Stability in your job history is a positive thing to banks and other lenders. Getting a new career before you apply for a mortgage may not affect your approval at all. However, finding a new career during the application process might affect whether or not you are approved.

Don't change banks or move cash around in your accounts. Your lending institution will require you to provide recent bank statements for all of your accounts: checking, savings, money market, and other liquid assets. Your lending institution looks for a steady flow of your funds each pay period, in order to avoid fraud. Even for practical reasons, transferring money or changing banks might make it difficult for your lender to document your bank history.

Don't give cash directly to your seller (generally in the case of of "for sale by owner") to be considered a "good faith" deposit. As a rule, your good faith money is yours, not the seller's up until the deal closes. Although your FSBO seller may not realize this, the good faith money should be applied to your closing expenses. We recommend that you put the funds into a trust account or get an attorney to hold them until the closing of the sale. The disposition of good faith funds, in the case of a failed transaction, should be included in the contract with the seller.

At HERN CAPITAL LLC, we answer questions about this process every day. Give us a call: (626)918-2419.