Why You Shouldn’t Make Large Purchases When You’re Under Contract

So you’re under contract on a house. Congratulations! This is a huge step towards homeownership. You may also be thinking, “There’s so much furniture that I need to buy!” If you are using a mortgage to fund your closing, you may want to rethink this step.


Why would purchasing furniture, buying a new car, or paying off large amounts of credit card debt be detrimental during the process of being approved for a mortgage? Mortgage lenders require certain debt-to-income ratios during the loan process that require your monthly debt to be divided by your gross monthly income. The higher your monthly debt payment, the less money you have to dedicate towards paying off your mortgage. Mortgage lenders want to make sure that you can make monthly payments without becoming delinquent on the loan to purchase your home. 


Changing your debt-to-income ratio during the home-buying process can have several consequences. The worst-case scenario would be that your mortgage lender no longer allows you to qualify for a loan, and you are forced to terminate once under contract on a home. If the lender is unable to fulfill the loan obligations, the contract can be terminated and the seller does not allow the buyer to find another lender to approve the loan, the buyer will be forced to terminate the contract and the seller will take the buyer’s earnest money. Secondly, the closing may be delayed. While this does not seem like a drastic consequence, changing a timeline can affect when a buyer can move into their potential new home or if they need to terminate the contract until a lender can approve them for a loan.


Though these are not the only examples of what could happen during the home buying process to affect your eligibility for a mortgage, it is important to consult a professional about any major purchases during the home buying process to ensure your loan approval is not jeopardized. If you have any questions about the home buying process or need to be set-up with a mortgage lender, please give us a call at 678-921-1470! 


Written by Elizabeth Gill

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