The Ultimate Guide to Credit Cards
Thursday, June 30, 2022

Can I Use My Credit Card Before Closing on a Home?

Can I Use My Card Before Closing On A Home

credit card advice

Marcie Geffner

Written by: Marcie Geffner

Marcie Geffner

Marcie Geffner is an award-winning reporter, editor, and writer. Her stories about banking, credit cards, insurance, economics, small business, and other subjects have been featured by the Los Angeles Times, Washington Post, Bankrate, Credit Karma, Bookmarks Magazine, FOX Business, CNBC, Yahoo! Finance, and dozens of major U.S. newspapers. Her articles have been cited in seven nonfiction books and two U.S. Congressional hearings. She edits nonfiction, memoir, and fiction, and contributes to Kirkus Reviews. Marcie holds a bachelor’s degree in English from UCLA and MBA from Pepperdine University.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro

Lillian brings more than 30 years of editing and journalism experience. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct instructor at the University of Florida. Today, she edits all CardRates content for clarity, accuracy, and reader engagement.

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Reviewed by: Ashley Dull

Ashley Dull

With more than a decade of experience as a content manager and marketer, Ashley has specialized in finance coverage since 2015. She has worked closely with the world’s largest banks and financial institutions, up-and-coming fintech companies, and press and news outlets to curate comprehensive content and media campaigns. Her credit card commentary is featured on national media outlets that include CNBC, MarketWatch, Investopedia, and Reader's Digest, among others.

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Advertiser Disclosure

Homebuyers are well-advised to be mindful of their credit usage when applying for a home loan and waiting for it to close. But does that mean you can’t use your credit cards at all during this time?

Not exactly.

While there are some specific card-related activities you should avoid when buying a home, you can continue to use your cards to make everyday purchases as you normally would.

The activities you should avoid directly affect your credit scores or debt-to-income (DTI) ratios — two important parts of your financial life that factor into your ability to be approved for a mortgage. Disrupt them, and your home closing could be delayed or, worse, canceled by your lender.

How Card Use Affects Your Credit Scores

It’s no secret that credit card debt can affect your credit scores. In fact, card debt can affect every aspect of your scores, including your payment history, your utilization ratio, the length of your credit history, the mix of types of credit you’ve used, and whether you’ve recently applied for more new credit.

FICO Score Factors
Credit cards can affect every aspect of your credit scores.

If you have excellent credit, small changes in your credit scores while waiting for your home to close probably won’t have a material impact. It’s when your credit scores are closer to the danger zone that you’ll need to be careful. 

Your lender should be able to give you some insights into how well you’ve managed your credit and whether a dip in your scores — even if it’s temporary — may adversely affect your home closing. 

The details can be complicated and involve a lot of variables. To keep things simple, your lender may advise you not to use your cards at all, even though that drastic step may not be necessary.

How Card Usage Affects Your DTIs For a Home Loan

Your DTI helps your lender determine whether you earn enough income to afford your minimum payments for your existing debts plus your new home loan. 

Most lenders use two DTIs. The “front-end” DTI is calculated as the expected housing expenses (e.g., mortgage payment, property tax, homeowner insurance premium) divided by your gross income. 

The “back-end” DTI includes your expected housing expenses, plus your minimum monthly payments for your car loans, student loans, credit cards, personal loans, and other debt. As you can see, credit card debt doesn’t affect your front-end DTI, but it can affect your back-end DTI.

DTI Ratio
Lenders use a front-end and back-end DTI to see how much mortgage you can afford.

When lenders calculate DTIs, they don’t all use the same guidelines to determine what counts as income (e.g., salary, bonus, dividends) or debt (e.g., mortgage, auto, student, credit cards). 

Those differences mean calculating DTIs generally isn’t a doable DIY project for homebuyers. You’ll need to ask your lender for details.

DTIs can be a factor in more than just whether you’ll qualify and whether your home loan will close. They can also affect the type of loan, annual percentage rate (APR), and maximum loan amount you’ll be offered when buying a home.

What DTIs Do Home Lenders Require?

There’s no one specific DTI you must have to qualify for a home loan. Instead, the DTIs you’ll need will depend on your credit scores, your down payment as a percentage of your new home’s purchase price, how much cash you’ll have after your loan closes, and the type of loan you want, among other factors. 

Some lenders and loan programs are more flexible than others. Using your credit cards could be riskier if your DTIs are very close to the margin between qualifying or not qualifying for the loan amount and interest rate you want.

You’re not out of the woods on this issue once you’ve been prequalified for your loan. That’s because your lender will probably take a last look at your credit scores and DTIs a few days before your closing. 

If your scores or back-end DTI deteriorated because you ramped up your card use and spiked your minimum monthly payment, your final loan approval could be delayed or even canceled.

The same caution applies to other types of debt, such as a new car loan, personal loan, student loan, store cards, or another home loan. In all cases, it’s wise to wait until your home loan closes before you apply for additional credit.

It’s best to wait until your home closes before taking out any new loans or credit.

As you count down the days until your closing, you may be tempted to make big purchases or apply for new cards because you think they won’t affect your credit scores or DTI until after your home loan closes. 

That thinking could prove risky because real estate closings are often delayed for various reasons. If your closing is pushed off, even for just a day or two, your seemingly last-minute transactions or new credit applications may not be as safe as you thought.

Two other activities you may want to delay until after your home loan closes are asking your card companies for higher credit limits and closing any of your card accounts. Those activities could affect your credit scores or DTIs, which, again, your lender may double-check before your loan receives final approval.

For most homebuyers, the goal isn’t to zero out their card balances or rocket their credit scores into the stratosphere. The goal is to keep your credit situation stable and within your lender’s guidelines until your loan closes.

Best Cards For New Homebuyers

As a new homeowner, you’ll have many excellent choices for new cards to update your home, purchase more furniture, and earn cash back, points, or travel rewards along the way. 

Some cards offer attractive card benefits for new homeowners, including cash signup bonuses, promotional 0% APRs, and extra rewards for shopping at warehouse clubs. You can also use your cards to buy tools and materials for home improvement projects or pay home improvement or repair contractors for their services.

Discover it® Cash Back Review

at Discover Card’ssecure website

BEST OVERALL RATING

★★★★★
4.9

OVERALL RATING

  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300.
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  • Redeem cash back in any amount, any time. Rewards never expire.
  • NEW Intro APR: Get a 0% intro APR for 15 months on purchases. Then 13.49% to 24.49% Standard Variable Purchase APR applies, based on credit worthiness.
  • No annual fee.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 15 months
0% Intro APR for 15 months
13.49% – 24.49% Variable APR
$0
Excellent/Good
Discover it® Balance Transfer Review

at Discover Card’ssecure website

BEST OVERALL RATING

★★★★★
4.9

OVERALL RATING

  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300.
  • Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • NEW! Discover helps remove your personal information from select people-search websites. Activate by mobile app for free.
  • Redeem cash back any amount, any time. Rewards never expire.
  • No annual fee.
  • Click “Apply Now” to see terms and conditions.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 6 months
0% Intro APR for 18 months
13.49% – 24.49% Variable APR
$0
Excellent/Good

BEST OVERALL RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Enjoy a one-time bonus of 75,000 miles once you spend $4,000 on purchases within 3 months from account opening, equal to $750 in travel
  • Earn unlimited 2X miles on every purchase, every day
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  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
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Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
17.49% – 25.49% (Variable)
$95
Excellent, Good

Making your new mortgage payments on time every month may even help boost your credit scores further and give you access to even better cards with premium perks, benefits, and rewards.

Waiting to buy new furniture, appliances, and other goods for your new home until after your loan closes may seem like a hardship. But remember, the delay is only temporary. 

As soon as your home loan closes, you can apply for new cards, request higher limits, and move forward with your plans — and purchases — for your new home.

Advertiser Disclosure

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