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Can I Buy Furniture While Applying For A Mortgage?

Image 61Almost every home buyer wants to buy new furniture to put in their new home. Commonly asked is whether or not it’s okay to buy furniture while applying for a mortgage. See Joe’s question below.

Dear John,

Question:

We paid off two credit cards. We owe $1,500 ($7,500 limit) on one we have left and $400 ($6,000 limit) which this one is paid off every month. Would it be okay to buy furniture that costs $1700 (on a card that has $4,700 limit)? We just don’t want to screw anything up. Let me know your thoughts.

 

Dear Joe,

I understand wanting to buy new furniture before you close on your new home, but you’re applying for a mortgage and still under scrutiny by Underwriting. I can’t recommend adding any additional debt.  The variable is how the monthly payments will report.  Even though you pay a card down, the minimum payment will not be reduced proportionately.  And even if you pay it off, the credit report will still show a minimum payment to be counted into the debt to income ratio.

As for the new credit: just applying for it will lower your score, and I am not sure how they will report their minimum payment.  Remember, merchant credit cards always damage your credit scores and you should always avoid merchant accounts.  It is the only type of credit that the balance is always assumed to go up every month, until several months are reported and a conservative debt pattern on your part is established.

While you are applying for a mortgage, you want to maintain the lowest amount of debt possible paired with the highest credit score possible.  Neither of these can happen if you buy furniture while applying for a mortgage.  I don’t know that buying furniture would be a deal breaker but it would definitely worsen your credit profile.  If you have to have it let me know and I will spend some time figuring how we might pull it off. I don’t want to be the bad guy but most likely it will hurt us.
You’re getting an awesome home, Joe. Buy your new furniture the day AFTER closing. You can sit on milk crates like you did in college until Mathis Brothers delivers.  -John

Posted in: First Time Home Buyers

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