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6 pitfalls to avoid when purchasing a home

THIS IS A FULL DOCUMENTATION WORLD NOW.  Be aware of the hang-ups that can arise during the course of a transaction.  If you are in the market to purchase a home, there are several things that can come up which could kill a deal.  It is almost impossible for a loan officer to foresee all of these things happening.  Therefore, it is your obligation as a responsible home buyer to be aware of them and bring them to your loan officer's attention.  Borrowing money is a two way street.

  1. Do not make any major purchases of any kind while trying to qualify for and buy a home.  Stay away from buying any vehicles.  Do not open any furniture accounts or household appliance accounts.  If you can't pay cash for it, then wait until after your home is closed.  Just because you have a loan approval doesn't mean the deal is done.  Wait until it has funded!!!
  2. This is a three for one rule!!!  1.  Do not move money around.  2.  Make deposits like you normally would.  3.  Do not keep your money for the home under your mattress or in a safe.  Cash kept on hand at home is NOT an acceptable source.  All unusually large deposits have to be explained.  Lenders do not like large unusual deposits and in fact cannot be used towards the purchase of a home.  If the explanation is not of an acceptable source then you will not be able to use those funds for the down payment or closing costs.  Ask your loan officer if your deposit will be an acceptable deposit.  If it is not, then you will be forced to wait out the 60 days until that deposit becomes seasoned and part of your 60 day balance.  By that time, you would lose the deal on your home purchase if you are already in contract to buy a home. 
  3. Do not change jobs.  Ask your loan officer if the relocation to a new job will work for your home purchase.  Earning more money may not be a good reason to change employers before or in the middle of your transaction.  If you are bonus based, commission based or a tip wage earner, the lender will no longer allow you to use that history of income if you leave that job.  Even if the new job gives you the same earning style.  These types of earnings styles can only be counted if you've been earning them from the same employer for 2 consecutive years.  Ask your loan officer before making any employment changes.
  4. Do not allow your credit to be pulled by multiple institutions!!!  The rule of thumb is that you should be able to pull your credit multiple times for a mortgage within a 30 day period without it impacting your score.  However, should you still be looking for a home or need to start over looking for a loan after that 30 days, your score could decline enough that you may pay a higher rate or no longer qualify for the loan all together.
  5. If you don't have a bank account, then open one.  You will be making mortgage payments.  It will benefit you and make life easier by opening one.  To make on time payments, consistently and responsibly requires the use of a bank account.  Every lender will allow you to set up automatic payment withdrawal.  Once you have it, you'll love it.  This also shows the lender that you are living in the 21st century.  Ditch the money orders.  The typical home buyer has a checking and savings account.  You want to show the lender that you are at least meeting the standard. 
  6. This last one is a sleeper that comes up only now and again.  Unreimbursed Employee Expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 9).  This is a deduction taken on your income tax return.  If you do not have this deduction on your taxes, then don't worry about it.  If you do have this deduction on your taxes and you are a W-2 wage earner, then expect the lender to cut your income by the amount of your reported unreimbursed employee expenses.  If you are working with a lender that isn't aware of this, then you need to align yourself with one that does.

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