Why You Should Not Make Any Major Credit Purchases

November 4, 2023

Before jeopardizing your dream home, heed this closing warning: small splurges could deny mortgage approval and cost you your perfect nest.

Have your eyes on a Raleigh-Durham dream home? Before you pull the trigger on major purchases, heed this warning from prominent local real estate professional Tim Clarke:

Even small splurges could derail your closing and jeopardize your perfect home. Let's explore why and how to avoid sabotaging your real estate goals.

Why You Should Not Make Any Major Credit Purchases

Welcome prospective homebuyers! I'm excited to provide key guidance from prominent Raleigh-Durham real estate professional The Tim M. Clarke Team on your journey towards homeownership.

Avoiding Major Credit Purchases

Even a small 1,000 furniture set or 500 TV purchase could tip loan qualifications and jeopardize closing. Let's explore risky scenarios that could deny loan approval.

Avoiding Major Credit Purchases

Specifically, every 100 spent monthly on credit could decrease eligibility by 10,000. Seemingly inconsequential purchases add up.

Scenarios that could disqualify your mortgage:

  • Financing a $30,000 luxury vehicle
  • Opening 3 new credit cards and transferring balances
  • Furnishing the new home with $15,000 of furniture/appliances

Specific examples that could deny loan approval:

  • Putting a $7,000 mattress on a credit card
  • Buying a $600 smartphone on installment payments
  • Financing new $3,000 living room furniture
  • Purchasing a $4,000 appliance suite

Even if each item fits within your budget, collectively they demonstrate risk. Lenders analyze total new debt obligations.

Implications of Pre-Closing Splurges

By jeopardizing your loan, small splurges could cost you a non-refundable $5,000 earnest deposit or favorable interest rate locks. Wait to celebrate until you close.

How Credit Purchases Impact Mortgage Eligibility

Mortgage pre-approvals offer initial home buying estimates, but final mortgage eligibility depends on maintaining strong finances.

Unfortunately, major credit purchases can drastically reduce mortgage eligibility.

Specifically, every 100 spent monthly on credit could decrease eligibility by 10,000. For example, a 300 monthly car payment may reduce mortgage eligibility by 30,000 - the difference between your current option and your dream home.

Implications of Pre-Closing Splurges

Even savvy savers should avoid large purchases pre-closing. Closing should be the priority, as splurges could jeopardize it.

No buyer wants to lose their perfect home due to poor financial decisions. With disciplined spending, your real estate goals are achievable.

Additional Guidance from Tim Clarke

For further home buying best practices or one-on-one Raleigh-Durham market insights, contact Tim Clarke's team.

Their commitment, experience and local expertise facilitates smooth home purchases. Discover firsthand how professionals like Tim Clarke enable homeownership dreams.

I'm happy to rewrite this content again if any sections need further improvement or expansion. Please let me know if you have any other suggestions!

Final Thought From Tim

After 17 years facilitating Raleigh-Durham real estate transactions, I cannot stress enough - wait to celebrate until you close.

Even savvy buyers jeopardize closings with seemingly inconsequential purchases. Your loan officer scrutinizes debt obligations to verify eligibility and risk.

My guidance? Hunker down and remove all temptations until you hold the keys.

Avoid financing vehicles, credit card transfers, appliances, furniture - you name it. Stick to essential, budgeted spending funded by debit/cash.

I once witnessed eager buyers lose a non-refundable $15,000 deposit because they financed living room furniture.

Had they waited 30 days, they would have furnished their stunning new craftsman-style home. Instead, the purchase disqualified their mortgage terms.

As a Triangle resident for 30 years, I take pride in making homeownership dreams a reality.

My team draws on expertise from 1,000+ regional transactions to advise clients. Our goal? Pleasant, streamlined home buying without jeopardizing your perfect home.

My best advice? Contact my team early when considering Raleigh-Durham real estate.

We provide guidance tailored to your situation, priorities and timeline. Our commitment facilitates a smooth process from offer to close.

Together, we can make your homeownership goals achievable.

Frequently Asked Questions

What credit card spending is safe before closing?

Stick to regular, budgeted spending on a card you've held for 6+ months. Don't open new cards or transfer balances.

Can I buy furniture after the home inspection but before closing?

No. Wait until you hold the keys to furnish to avoid disrupting mortgage approvals.

What if I find my dream car? Should I wait to buy?

Yes. Even if you plan to pay cash, wait until after closing. Any large purchase could raise scrutiny.

How do I explain authorized user accounts to lenders?

Disclose and document which accounts you have access to but did not open. This demonstrates lower individual liability.

What debt-to-income ratio do lenders want?

Aim for a 36% DTI or lower. Higher ratios get approved but reduce mortgage eligibility.

Can I change jobs before closing my home loan?

Yes, but consult your loan officer first. They'll want to see consistent income sources to approve.

What happens if I miss a payment before closing?

Missing payments hurts your credit score. Expect questions and potentially higher interest rates if you miss.

How do I handle credit inquiries from loan shopping?

Upfront communication with your loan officer handles this. Inquiries from the same type of loan are bundled.

Can I open a HELOC after closing?

Yes. Many choose home equity lines after 12 months of mortgage payments to access equity.

How can I speed up closing?

Proactively submit requested documentation as soon as possible. Certified funds help too.

Tim M. Clarke

About the author

17 years as a Realtor in the Research Triangle, Tim seeks to transform the Raleigh-Durham real estate scene through a progressive, people-centered approach prioritizing trust & transparency.

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