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Todays Top Tip for Buying a House
If You Spend - the Deal Shall End!
It's more than a catchy title! DO NOT spend ANY of the downpayment or closing cost money that you declared to your lender early in the transaction.
For example, let's assume that on September 1st your were pre-qualified by a lender, and a few days later you signed a contract to purchase a home. So far - so good.
On September 4th you start providing information to your lender for your Loan Commitment. At this time, you show them you have saved in your bank account, $17000 for closing costs. "Very good", says the lender. "I think your closing costs will be about $16700, so you should be OK!"
Your credit check has come in with a middle score of 710 and you've been at the same employer for many years, so things are looking pretty good. Smooth sailing ahead!
Now comes the mistake many people make! Your closing date is not for a few weeks and there is a great deal on a big screen TV that will look awesome in your new family room! The sale ends Thursday and you wont have your bonus check from work until Friday. You hate to miss out on the big sale! You decide to spend $2800 from the checking account, because you know you have replacement money coming from your paycheck, bonus or whatever. And, you diligently replace the money when you get that check. Everything is fine, right! You got your TV, the money is back in the account! WRONG!
You've just created a huge problem that is not likely to surface until right before closing! It's going to cause a huge delay, jeapordize your loan and anger the Seller. Here's why...
Your lender wants to see your deposit and closing costs remain in your account for a certain period of time. This is called seasoning. This gives the bank confidence that you did not just borrow some money to show. This is sometimes called flashing. To prevent fraud, lenders will now stop a transaction dead in its tracks if your seasoned money gets touched!
Understand the lesson here ... do NOT spend a dime of the money you have already declared as deposit or downpayment money - paying it back is nearly meaningless and you WILL jeopardize your transaction.
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