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Can I Use Credit Cards Before My Loan Closes? 6 Tips for Buyers

As a home buyer, the loan application process is the most important part of securing your dream house. Ensure your loan is approved by avoiding certain financial actions that may affect your credit while your loan is pending.
As a home buyer, the loan application process is the most important part of securing your dream house. Ensure your loan is approved by avoiding certain financial actions that may affect your credit while your loan is pending.

The time between loan application and loan approval is crucial to the borrowers' approval status. Lenders track spending and credit changes between application and approval time and can completely deny the application if the borrower's credit status changes.

A top local agent can give you the advice you need to ensure you don't mess up your approval and change your credit status before closing.

Read on to discover a few tips to ensure you secure a home loan successfully.

Don't Apply for New Credit Cards or Loans

It's a common misconception amongst borrowers and loan applicants that their credit is pulled once and left alone during the loan approval process. In the past, lenders would pull the applicant's credit score 60 to 90 days in advance and use that information as is.

Credit must be pulled within 10 days of the loan closing. Applying for a new credit card initiates a hard pull on your credit score which can cause your score to drop. Depending on your credit score, this could severely alter the terms of your loan or cancel the loan altogether.

Don't Make Expensive Purchases

Buying a home is an expensive purchase, but it's also incredibly exciting. Many home buyers want to furnish their home with new furniture, appliances, and make structural upgrades immediately.

However, these purchases can cost thousands of dollars and are beneficial to put on your credit card at any other time than when your loan application is under review. Wait to make any large purchases on your credit card that you don't plan to immediately plan to pay off.

Don't Change Jobs

Employment verification is just another step in the loan approval process. It will easily be reviewed and verified if you remain at your current job while your loan is under review.

However, if you switch jobs mid-application, your lender will need to update your employer's information and your salary, which, if lower than your previous salary, could alter your ability to pay off the loan you applied for.

Don't Deposit Large Sums of Money Without Paper Trail

Say goodbye to your Tony Soprano days if you want to secure a home loan. Although, Tony would have probably just paid with cash. Most of us don't have that luxury and need to go the mortgage route. While you're waiting for mortgage approval, don't deposit large sums of money without a paper trail.

If a lender reviews your deposit history and they note a considerably large influx of cash, they may assume you received another loan and now have a higher debt-to-income ratio. Perhaps your family has gifted you a chunk of change as a wedding gift or a relative recently died and left you a small sum, ensure that deposit is property traced and recorded to prove to the lender it's free a clear.

Don't Buy Things on Store Credit

A lot of big box stores and furniture retailers offer layaway programs that allow buyers to take the item home and pay it off via monthly installments. While it's not the same as a traditional store credit card, this loan still counts towards your overall credit score.

Your debt to income ratio will increase and the store you're purchasing from will pull your credit, affecting your FICO score. Patience is a virtue and the keys to no-payments-for-a-year, American Signature Furniture are yours if you just wait until the loan closes.

If You Don't Know, Ask

Different lenders have varying protocol when reviewing loans. Some lenders are more lenient on credit but heavily reliant on current income and debt to income ratio. Others want to see a long history of employment and a high credit score.

If you're not sure whether a credit card purchase, cash deposit, or job change will affect your loan application, simply ask the potential lending party. They should be able to advise the best way to proceed that also ensures the approval of the loan.

Buying a house is an exciting time but there are many details to keep straight. The loan approval process is just one step in the lengthy journey to home ownership. Working with a Clever Partner Agent lightens the load.

Clever's knowledgeable, experienced realtors have expertise in all areas of a home purchase. What's more, Partner Agents offer a Home Buyer Rebate of $1,000 to buyers in qualifying states on homes over $150,000. If you're looking to purchase property, contact Clever today and speak with a Partner Agent who wants to help find you the home of your dreams.


Reuven Shechter

Reuven Shechter is the Outreach Coordinator at Clever Real Estate, the free online service that connects you with top real estate agents to help save on commission. He spreads the word about Clever, disseminating studies to journalists and developing relationships with media outlets. Reuven is passionate about investing in real estate and creating lasting success for families. His writing has been featured in Max Real Estate Exposure, Leverage Marketing, and more.

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