What to Avoid During a Home Purchase

Many new homebuyers make the mistake of rushing out to buy new things for their home as soon as the seller accepts their offer and the lender approves the loan. Until the keys are handed over, there are still some hurdles to jump. Here are some things to stay clear of during the home buying process to be sure the transaction goes well.

Don't make expensive purchases. It may be tempting to order that new Turkish rug for the soon-to-be-yours living room, but it's best to avoid making major purchases like furniture, appliances, electronic equipment, or cars until your home loan closes. You may send up red flags with your lender if you buy new electronics on your credit cards during your loan process. Since lending institutions are reviewing your financial accounts, a large cash purchase is also a bad idea.

Don't look for a new career. Lenders look for a consistent job history on your application forms. Getting a new career before you apply for a mortgage loan may not compromise your approval at all. However, if you switch careers before approval, your mortgage process could fail or be bogged down.

Don't move money around or switch banks. While the lender reviews your mortgage loan package, you will probably be required to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid finances. The lender looks for a consistent flow of your money over the month, in the interest of ruling out fraud. Switching banks or moving funds to another account - no matter the purpose - may hinder the documentation of your funds.

Don't give money directly to your seller (commonly in cases of "for sale by owner") for a "good faith" deposit. Your good faith money does not belong to the seller: it remains yours until closing. The good faith money is to be applied to your expenses closing; your individual seller might not know this. Find a lawyer or other neutral party who is able to hang on to the money or put it in a trust account until you close. The final disposition of good faith money, in the case of a failed transaction, should be documented in the purchase agreement with your seller.