Reasons to Avoid Major Purchases During Mortgage Application

There are a few suggestions you may receive from your mortgage lender, realtor or other advisors during the homebuying process, and several of these will be in the financial realm. One that you may already be aware of, as it's common advice for new homebuyers: It's best to avoid making any major, life-altering purchases during your mortgage application and approval phase.

At Integrity First Lending, we'll walk you through every important step of the process for any mortgage you're considering, whether it's an FHA loan, conventional loan, investment property loan or any other type you might be looking into. Why is it often advisable to avoid major purchases during your loan application and closing periods, and what are the ranges of time you should typically steer clear of here? Let's look over all the important elements at play here.

Why Major Purchases Are a Risk

As anyone who has been through a home purchase can tell you, this process involves lenders viewing themes like your credit score, employment history and debts to determine whether you're a good candidate for a loan. If everything lines up here, you'll be approved for a mortgage and can start shopping for a new home within your budget.

If you make any major purchases during this period that affect your debt-to-income ratio - which is the percentage of your monthly gross income that goes towards covering debts - you could unintentionally jeopardize your loan approval. These kinds of purchases can come in many forms beyond simply buying a new car or taking out a loan for a boat, too; examples might include using a credit card to finance expensive furniture or appliances for your new home, co-signing on another person's loan, or taking out a new line of credit.

In short, any kind of purchase that would put you in additional debt would be viewed as a red flag by your lender and could result in your loan being denied. If you absolutely must make one of these kinds of purchases during the homebuying process, the best thing to do is wait until after you've closed on your home loan.

When to Avoid Making Purchases

Ideally, you should avoid making any major purchases - or opening any new lines of credit - for at least six months before applying for a mortgage. This will give time for the dust to settle on your credit report, so to speak, and make it easier for your lender to get an accurate picture of your financial health.

If you already have a mortgage and are considering refinancing, you should avoid making any major purchases or opening new lines of credit for at least three months before applying for a refinance loan.

At Integrity First Lending, we understand that the homebuying process can be complex, and we'll be with you every step of the way. Contact us today to learn more about our services and how we can help you secure the best possible mortgage for your needs.