How a Couch Can Prevent You From Buying a Home
Buying a home is an exciting experience, particularly for first time home buyers. What many people don’t realize is that when you get a loan to buy a house the lender makes their decision based on more than just a credit score and income level; they are also looking at your debt level!
In the modern real estate marketplace, it is exceedingly common for a lender to pull your credit report again just before settlement in order to make sure nothing has changed from the time they first gave you the approval.
Shifting Credit Worthiness
If you decide to make any big purchases between the time you are pre-approved by a lender and the time you go to settlement, you may be changing your debt-ratio or affecting the amount of money you have in savings – just the sort of things that matter to your lender.
Let’s say you decide to go out and buy a couch or furniture set for your soon-to-be new home. The salesman tells you that the financing is zero-interest and you don’t have to start making payments for a year. It sounds like a great deal – and it may be – but it’s still adding debt, and the lender is probably going to see it on your report.
If they do, you may find yourself no longer qualifying for the loan that you need in order to purchase your home, and suddenly that new couch has cost you the ability to buy the home you want (not to mention you’ll have nowhere to put it!). It kinda stinks, but the easiest way to prevent this from happening is to avoid any big purchases while you are in the process of buying a new home.
When I talk about “big purchases,” I mean furniture, expensive electronics, cars, boats, appliances, and anything else that might be considered a “big-ticket” item. While it’s normal for people to want a new living room set or big screen tv to enjoy in their new home, make sure it doesn’t damage the potential of buying the home in the first place!
(photo courtesy of dionhinchcliffe via flickr cc)
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Jon Benya Keller Williams of Southern Maryland
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fax (301) 632-5481
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