Things to Avoid While Buying a New Home

What's better than buying a bunch of new stuff to go in your future home? Not much. But buying big ticket items before your loan closes can be a misstep. It's best to remember that until you get the keys, your lender is watching you very closely. Here are some actions to refrain from before closing to assure your transaction goes smoothly.

Don't make expensive purchases. It may be tempting to buy that new easy-chair for the soon-to-be-yours den, but it's advisable to stay away from making major buys like furniture, appliances, electronic equipment, or vacations until closing. Your credit numbers could be altered suddenly if you purchase new furniture using plastic. Using cash to purchase expensive items can even create a problem: many lenders take into consideration your cash reserve when approving your loan.

Don't get a new job. Stability in your work history is a good thing to banks and other lenders. Getting a new career before you start the application process for a mortgage may not compromise your approval at all. But for some people, getting a new career during the loan approval process might raise concern and stymie your application.

Don't change banks or move cash around in your accounts. While the lending institution reviews your mortgage loan application, you will probably be instructed to produce bank statements for the last two or three months on your saving and checking accounts, money market funds and other liquid wealth. Your lender is looking for a consistent rise and fall of your funds each month, in the interest of avoiding fraud. Changing banks or transferring finances elsewhere - even if its just to consolidate funds - may hinder the review of your funds.

Don't give your FSBO (for sale by owner) seller a "good faith" deposit, made out directly to him. Your earnest money does not belong to the seller: it remains yours until closing. Although your seller may not realize this, any good faith money must go toward the buyer's closing expenses. Find a lawyer or other neutral party who is able to hold the funds or put them in a trust account until you close. The purchase contract should document where the funds go if the home purchase does not go through.