After a seller accepts your offer to purchase a property, you need to deposit a certain amount of money to show the seller that you have every intention of buying the house, and it also serves as a reimbursement to the seller, when the deal does not go through, for taking the property off the market – this money is called the earnest money. Between when the seller accepts your offer and closing, you are prone to make a misstep that would jeopardize the deal and make you lose the earnest money. This article summarizes ways you can ensure that your earnest money is not wasted. Read on:
#1. Do Not Change the Nature of Your Job in Any Way
Some lenders require that you perform in a new job or position for 18 months to 2 years before they can lend you money. If you are planning on taking another job or position, now is not the time to do it. Unless you are an all-cash buyer, without a lender you would not be able to purchase the house and therefore you would lose the money you have already deposited – the earnest.
#2. Do Not Buy A car, Truck or TV
Lenders need a credit report in order to make their decision on whether to lend you or not. Your credit heavily depends on the age of the line of credits that you have, your total debt to income ratio, and the amount of circulating credit that you have available. Therefore, you would have to keep eyeing that new car model for a while, as the time is not right for you to make any huge purchases.
#3. Do Not Originate Any Inquiries into Your Credit History
Do not get lured into making an inquiry into your credit history by those funny commercials about how to get a free credit report. During this period, contact only your lender if you want to know your anything concerning your credit.
#4. Do Not Spend the Money You Have Set Aside for Closing
Unless maybe you have some fatal emergency, do not go spending the money you set aside to take care of the closing costs. During closing any form of bad news, such as you are short some cash, would have the seller gladly walking away with your earnest money to cover damages.
#5. Read Your Contract Carefully
A real estate transaction involves a lot of document and sometimes you are tempted to just sign the papers without reading them first. Do not risk this with your contract document. Especially if you are buying an HUD property or an REO (bank owned), usually there is a clause that states that earnest money is not refundable. Some sellers also make the earnest money non-refundable after the repairs and the inspection contingencies are observed.