Please ensure Javascript is enabled for purposes of website accessibility

Why You Should Not Make Big Purchases Until You Close on Your House Loan?


When you are about to close on a home loan, you should not purchase items on your credit card, either be it a car, furniture, or appliance, as it will impact your credit score and history, ruining your chances of getting approved. You might want to make purchases using your credit card to earn reward points that can be redeemed for cash back or merchandise, but it may cause you several problems concerning staying qualified for a home loan. Do you know how? Continue reading to find out. 

How Would Purchasing Items Impact Your Loan Approval Chances?

Your mortgage lender will review your financial credentials before pre-approving and closing your loan. So, if you make purchases for your home through your credit card before closing on your loan, it will show up in your credit report when your lender runs a check.

Also, the huge balance on your credit card will impact your credit utilization ratio (refers to the amount of credit used versus credit available), thus affecting your credit score. A high credit utilization ratio is a red flag that will make lenders consider you a risky customer.

Your credit card company will also report your new minimum payment based on your credit card balance. This will likely impact your debt-to-income (DTI) ratio, which refers to the amount you owe relative to what you earn. Mortgage lenders usually consider the DTI ratio a crucial factor in determining whether or not to sanction your loan.

With a higher DTI ratio and lower credit score, you are less likely to get a loan from your lender.

Tips to Prevent Closing Delays on Your Home Loan

Follow these tips to get your home loan approved without any delays:

  • Don’t make purchases through your credit card until your loan is finalized.
  • Review your credit card mistakes. Errors can occur if a company mistakenly reported your payment as late or mismatched your information with others. In that case, regularly reviewing credit cards will help identify and resolve these issues beforehand.
  • Don’t apply for any new loans.
  • Make credit card payments on time to maintain a good credit score.

Applying for a mortgage loan and getting approved is not always a smooth process. However, these tips will help ensure your home loan closes on time.

Consult with Brighton Escrow, Inc.

Whether you are planning to buy a home or home insurance policy in Hermosa Beach or South Bay Area, contact our professionals at Brighton Escrow, Inc. today. We are looking forward to providing you with best-in-class escrow services.

Related Posts