Avoid Making Large Credit Card Purchases Before Applying for a Mortgage

You have been planning for your big real estate purchase for months or even years. You have ample money available for a down payment, and your credit scores look great. Perhaps you want to take a well-deserved vacation, or you need to buy new kitchen appliances as a preparation for listing your current home for sale. The last thing that you want to do is to eat into your nest egg and to potentially not have enough money to buy the home that you really want. It seemingly makes sense to charge the purchase to a credit card, but the short-term impact of a large purchase could be more significant than you think.

What could happen if you charge up a credit card before you apply for a home loan? Credit scores could drop by up to dozens of points in some cases. This may make it harder for you to qualify for the full loan amount that you need. The interest rate could be higher, and this will yield a higher mortgage payment. Keep in mind that you may be responsible for this payment for several decades, so you understandably want it to be as low as possible. There could be an even worse result. Depending on the credit score that you started with and a variety of other factors, this major change to your finances could make getting approved for a new mortgage loan in the near future an impossibility.

Interest rates are projected to rise gradually over the next year or longer. To qualify for the best rate possible and to keep your mortgage payment as low as possible, it makes sense to focus on maintaining high credit scores. Do you have questions about the loan programs that you may qualify for or how a purchase could impact your credit scores? Contact the MortgageDepot lending team today.

Contact one of our loan consultants to learn more.