July 15, 2016

What’s better than buying a bunch of new furnishings to go in your future home? Nothing. But making large purchases before closing can be harmful. There still remain a few major hurdles to jump before your loan closes. Here are some actions to avoid before closing to assure your transaction goes well.

Don’t buy luxury items.
You may be itching to buy that new Turkish rug for the soon-to-be-yours living room, but it’s advisable to avoid making large purchases like furniture, appliances, jewelry, 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 even be a bad idea: most banks take into consideration your available cash when approving your application.

Don’t go on a career search.
Your recent career history should show consistency. Finding a new job (especially one with a better salary) may not change your ability toqualify for your loan. However, switching jobs in the middle of the loan process may influence your approval.

Don’t switch your accounts to a new bank or move around your cash.
Most lenders will require you to provide recent bank statements for all of your accounts: savings, checking, money market, and other assets. To avoid fraud, lenders want to see a consistent portrayal of how you earn your living and where additional money comes from. Switching banks or transferring money to another account – no matter the reason – could make it difficult for your lender to document your funds.

Don’t deliver earnest money directly to the seller in a FSBO (for sale by owner) purchase.
Your good faith deposit does not belong to the seller: it remains yours until the sale closes. Your good faith funds are to go toward your expenses upon closing; the FSBO seller might not know this. Find a lawyer or other neutral party who will hang on to the funds or put them in a trust account until closing. The final disposition of earnest money, in the case of a failed transaction, should be specified in the purchase agreement with the seller.


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