Things to Avoid While Purchasing a Home

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What's better than buying a bunch of new stuff to adorn your future home? Not much. But making large purchases before closing can be a misstep. Keep in mind that until your keys are in hand, your lender is watching your finances very closely. Below you'll find a list of things to avoid during this crucial time of your home purchase.

Don't buy luxury items. Although you will be listing ways to turn your new home into a castle, avoid big ticket purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and vehicle purchases until the closing of your loan. Your lender may send up red flags if you buy new furniture on your credit cards in the middle of your loan process. Using cash to buy expensive items can even be a mistake: many lending institutions look at your cash reserve when approving your application.

Don't go on a career search. Consistency in your work history is a good thing to lending institutions. Getting a new career before you start the application process for a mortgage loan may not compromise your approval at all. But for some, getting a new job during the loan approval process might raise concern and hinder your approval.

Don't switch your accounts to a new bank or move around your finances. Bank statements from recent months for all of your accounts (savings, checking, money market, and other assets) will likely be analyzed as the lender makes decisions regarding your loan application. Your lending institution looks for a consistent flow of your money over the month, in the interest of avoiding fraud. No matter the purpose, switching banks or transferring money could raise a red flag with the lender and slow down your approval process.

Don't give funds directly to your seller (usually in the case of of "for sale by owner") for earnest money. As a rule, your earnest money is yours, not the seller's until closing. A FSBO seller may not know that your good faith money must go toward your expenses at closing. Get a lawyer or other neutral party who is able to hold the funds or place them in a trust account until you close. If your sale falls through, your contract with the seller should specify to whom the earnest money should go.

Pacific Capital Mortgage Corp can answer questions about these "Don'ts" and many others. Call us: 714-939-3863.