Five Things to Avoid Before Buying a New Home or Property
Home & Construction Financing
Oftentimes new and first-time homebuyers make the mistake of rushing out to buy things to fill their new home with as soon as the seller accepts their offer, however there are still major hurdles to overcome before the keys are handed over. Here are five things to avoid during the homebuying process to assure your transaction goes as smoothly as possible.
1. Don't Make an Expensive Purchase. Talk with your Lender First!
It may be tempting to order that new sofa for your soon-to-be living room, but it’s best to avoid making major purchases like furniture, cars, appliances, electronic equipment, jewelry or vacations during the purchase of a new home or property. Purchasing a new home can have costs that one might not have incurred before. Making a large purchase even after closing could have unintended consequences, like your first payment being difficult to make. Using cash to purchase big items can also create a problem because many banks take into consideration your cash reserve when approving your mortgage. If you are considering a large purchase in the midst of the home or land buying process, give your loan officer a call and tell them what you are planning. By working with your loan officer first, you can ensure that your purchase will not have unintended consequences that could impact the purchase of your new home or land.
2. Don't Get a New Job.
Lenders like to see a consistent job history. Generally, changing jobs can affect your ability to qualify for a mortgage loan even if you are going to be making more income. Getting a new job during the loan approval process could raise some concern regarding repayment ability and affect your credit worthiness, especially since many programs require a current pay stub with at least 30 days of year-to-date income.
3. Don't Switch Banks or Move Money Around Unnecessarily.
As your lender reviews your loan package, you will likely be asked to provide bank statements for the last two to three months of your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account—even if its just to consolidate funds—could make it difficult for your lender to document your funds.
4. Don’t Give a Good Faith Deposit Directly to the Seller in a FSBO Purchase.
As a rule, your good faith deposit belongs to you, not to the seller, until the deal closes. Your FSBO (For Sale by Owner) seller may not know that your good faith funds should be applied to your expenses at closing. Get an attorney or other neutral party who can hold the deposit or put it in a trust account until you close on the home. Your purchase contract should dictate to whom the funds go should the transaction fall through.
5. Don't Disregard your Lender's Requirements.
You may have been pre-approved for the loan but your work with your lender is far from over following pre-approval. In order to process your loan, you need to meet certain requirements. You lender will require copies of your bank statements, W2s and other paperwork. It is up to you to get it to your lender as soon as possible for a timely loan closure. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to purchase your home or land.
Questions? Farm Credit of the Virginias has a team of qualified lenders that are eager to help you navigate a smooth and successful land and/or homebuying experience. Contact us or give us a call at (800) 919-3276 to chat with a team member.