Big Sales and Your Mortgage: Protect Your Credit Before Closing

Retail sales around holidays can be hard to resist. New appliances, a sofa for the living room you have not bought yet, a bigger TV. If you are planning to buy a home, though, a quick swipe of the card can create problems that are much bigger than the discount you scored.

How Spending Affects Your Mortgage

Lenders look closely at two things that everyday shopping can change:

• Your credit: Opening a new store card or carrying higher balances can lower your score. Even applying for new credit typically creates a hard inquiry.
• Your debt-to-income ratio: Every new monthly payment, like financing a couch or appliances, adds to your debts. A higher ratio can reduce how much you qualify for, or in some cases delay approval.

There is also the simple issue of cash. Money spent on extras is money that is no longer available for your down payment, closing costs or reserves.

Why Timing Matters Most

Many buyers do not realize that lenders often check credit again shortly before closing. A large purchase made after you are pre-approved, or even after you are under contract, can change the numbers your approval was based on. That can lead to extra paperwork, a delayed closing or a smaller loan amount. The safest approach is to keep your finances as steady as possible from application to closing day.

Shop Smarter During Sales Season

1. Set a spending limit before you shop, and stick to it.
2. Pay with cash or debit rather than financing or opening a store card.
3. Separate holiday spending from your home savings so one does not eat into the other.
4. Track every purchase so there are no surprises when you review your budget.
5. Make a post-closing wish list: Write down the furniture and appliances you want, and plan to buy them after you have your keys.

Keep Building Your Financial Profile

Sales season can actually be a good time to strengthen your position. Use any extra money to pay down existing credit card balances, check your credit reports for errors and keep your emergency fund intact. These steps can improve your profile and make the mortgage process smoother. If you are still a few months away from applying, paying a card down before the statement closing date can lower the balance that gets reported to the credit bureaus, which may help your score.

If you are not sure whether a purchase will affect your loan, ask your loan officer before you buy. A quick question can save you a lot of stress. You can also review your budget with our mortgage calculator, and first-time buyers may find our first-time home buyer page helpful.

Once you close, you can shop for your new home with peace of mind. Until then, a FLO Mortgage loan officer is here to answer questions about what is safe to do. Reach out to our team anytime.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.