What to Avoid During your Home Purchase

In the rush of excitement that comes with an accepted offer and a "yes" from the lender, some homebuyers make the mistake of taking their enthusiasm straight to the mall or appliance store. It's wise to remember that until your keys are in hand, your lender is watching your finances very closely. Below you'll find a list of things to stay away from during this critical time of your home purchase.

Don't overspend on big-ticket items Although you will be listing ways to turn your new house into a showplace, try to stay away from big ticket purchases like appliances, electronics, or furniture. We also recommend that you stay away from vacations and car purchases until the closing of your loan. Using credit cards to buy furniture could jeopardize your loan process by distorting your numbers. Because lending institutions are examining your financial accounts, a large cash purchase is also not advised.

Don't go on a job search. Stability in your work history is a good thing to lending institutions. Getting a new job before you start the application process for a loan may not affect your approval at all. However, getting a new career during the approval process could affect whether or not you are approved.

Don't change banks or move finances around in your accounts. Most lenders will require you to provide recent bank statements of all of your accounts: savings, checking, money market, and other liquid assets. In order to avoid fraud, lenders look for a clear and consistent picture of how you earn your money and where any additional wealth comes from. No matter the purpose, switching banks or transferring money can raise a red flag with your lender and slow down your qualification process.

Don't give earnest money directly to the seller in a FSBO (for sale by owner) purchase. As a rule, your earnest money belongs to you, not the seller until closing. Your good faith funds are to go toward your expenses closing; some individual sellers might not understand this. We recommend that you put the money into a trust account, or get a neutral party, like a lawyer, to hold it until closing. The disposition of earnest money, in the case of a failed transaction, should be written in the contract with your seller.

Cal Coast Financial Corp can answer questions about these "Don'ts" and many others. Give us a call: (510) 683-9850.

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