Can I apply for a new credit card even though I am under contract to purchase a house?

Short Answer:

Yes, but I would highly recommend against it. Any changes to credit, employment and move of assets can delay your mortgage lender from getting your file cleared to close. Better to wait until after closing to apply for new credit.

Longer Answer:

A few weeks ago, I had a client under contract call me and ask the following question "can I apply for a new credit card?"This is a common question that arises during this process is whether it's advisable to apply for a new credit card (for new furnature, applicances, etc.) while under contract to purchase a house. Here's what you need to know:

1. Impact on Credit Score: Applying for a new credit card can temporarily lower your credit score due to the hard inquiry made by the credit card issuer. This dip in your credit score might affect your mortgage approval, as lenders closely monitor your credit profile during the home-buying process.

2. Debt-to-Income Ratio: A new credit card or loan can alter your debt-to-income ratio, a key factor lenders consider when approving a mortgage. Even if you don't carry a balance, the new credit line will have to be updated on your credit report requiring additional documentation and delay in getting to the clear to close status.

3. Timing is Crucial: If you must apply for a new credit card or loan, consider waiting until after your mortgage has closed. This ensures that your credit profile remains stable throughout the home-buying process.

4. Communication with Your Lender: If you find yourself in a situation where applying for a new credit card is necessary, communicate with your lender. They can provide guidance on how best to move foward including any additional documentation they might require from you.

Conclusion: 

While it might be tempting to apply for a new credit card or loan, especially if it offers enticing rewards or benefits, it's generally advisable to hold off until after your home purchase is complete. Maintaining a stable financial profile is key to ensuring a smooth mortgage approval process. Always consult with your lender before applying for any new debt

If you have other mortgage process questions, please reach out at teamjd@mainstreethl.com

These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact me.

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