Tuesday's Tip: Don't Buy Anything On Credit Once You Start The House Hunting Adventure!
Over on my Facebook business page, Northeast Florida Life, I do a brief post on Tuesdays called #TuesdaysTips, that talks about a tiny piece of the real estate puzzle. So, I figured I'd go into a little more depth on the same topics here.
Today's tip is about not buying anything on credit while you're in the process of buying a house. Some will say, while you're under contract, but you need to refrain, even while you're just starting to look.
Here's why: Let's say you get pre-approved and while looking you get another credit card or buy some furniture. That has the potential to lower your score and cause your debt to income ratio to become higher, which can cause the lender to deny or re-package your loan with a higher interest rate. They see you as more of a risk.
So, imagine you get pre-approved thinking you're ahead of the game. You open up a new credit card for whatever reason. You find the house of your dreams, write an offer and it gets accepted. Yeah you!! Not so fast though...you make application and the contract gets into your lender's hands, they run your credit again and find that you have new credit and you were already pushing the debt to income ratio to its limit. Can't move forward or worse, that new credit card doesn't show up until the lender does the final credit check, which is close to closing and then you're denied. You lose the money spent on inspections and appraisal, plus the house of your dreams. That really sucks and it will knock you back a few steps, plus tick a few people off.
Now, I'm not saying that always happens, because it doesn't. It's possible you have a high enough score that it doesn't affect it and your debt to income is fine or awesome. Just don't do it and take the chance of getting into a new home. I know, I sound like a mother hen. :)
Here's another one that happens a little more often. You're on your way to closing in less than 2 weeks and you're really getting excited. You are wanting to buy some new furniture for the new home, so you run down to the local furniture store and buy a pretty sweet living room suit on credit. You think you just saved some time and you can't wait to close to get it moved in. The only thing tho, you didn't realize the lender checks your credit again before closing to make sure nothing changes and it did change. And you lose your approval a week before you're scheduled to close on a short sale home that you waited months to get short sale approval on. (I know that was a long sentence with no commas, but if you go back and read it really fast and hurried, it will sound way better!)
That sucks big time! That scenario is a true story that happened to a couple in another state. Luckily for the sellers, it went under contract fairly quickly again and short sale approval was faster the 2nd time around. Always wait to get new furniture until after you close.
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Checkout the Northeast Florida Home Search which includes, Jacksonville, Orange Park, Middleburg, Fleming Island, Green Cove Springs, The Beaches, St Johns County and other surrounding areas close by: