buying furniture before mortgage loan closes? (credit report, rate, financing, bank account)

[Go Blue 99]

My wife and I are closing on a new townhome in March. We have excellent credit scores (815/775).
We are going to buy some furniture this weekend because the store said it will take about 2 months to get everything in. The store is offering a credit plan where no payment is due for 12 months. We have the cash to pay up-front, but we would like to take advantage of the credit program so we can earn interest on our savings.

Simple question- is opening this furniture credit line before our loan closes in March going to hurt our credit score? I would hate to pay a higher mortgage rate because we decided to buy furniture on credit.

Thanks.

[ChipL]

I would definitely check with your mortgage broker or lender prior to making any large purchases on credit if you are currently working on a loan.

[rrufast]

With your credit scores as high as they are, I seriously doubt that taking advantage of the 12mos no interest at the furniture store would hurt you in any way.

BTW, You may want to inquire what kind of CASH discount the store is willing to offer. IMO, it should be a decent savings as they have obviously overly inflated the value of the furniture to cover the 12month spread.. Then again, that's just my suspicion..

[surfingatwork]

a lot of those pay in 12 months programs are not interest free they are in fact interest deferred. there's a BIG difference. if you wait until month 12 to pay the bill off and the company is late in processing your check (meaning it's processed on day 1 of month 13) you will most certainly get a bill for ALL THAT INTEREST. i would do one of two things pay with cash or make sure i pay that bill off on month 10.

[renriq02]

It will not affect your score....BUT you're taking on new debt.

Even though the payments are being deferred for 1yr...the lender will still tack on the debt...and then you must qualify with the new debt.

A LOT OF PEOPLE buy furniture, cars, gifts, etc during a loan process.
Almost all of them get declined because they dont qualify with the new debt.
Also, if the lender views new debt they will required a 'letter of explanation', and will keep a close eye on you before closing date. Which means they may repull your credit just to see if there's more debts.

Some new debts are reported within 30-45days after your purchase. (Reported on your credit report) A lot of borrowers try to take advantage of this but the lender will see the credit inquiry from a furniture store.
They will require a letter of explanation stating that you did not take on new debt or they will ask for the payment plan on the new debt.
If it's deferred for 1yr they will use their own model to determine your payment plan.

[filo74]

What a funny question, back when I was married, my wife and I were getting ready to close on our new home...we were about 2 weeks away from the closing when we walked into Ethan Allen and bought 10,000 worth of furniture. It did NOT affect us at all. Funny that I see the exact same concern I had 3 years ago. Go ahead and get your furniture.

[rcarrillo]

Originally Posted by filo74

What a funny question, back when I was married, my wife and I were getting ready to close on our new home...we were about 2 weeks away from the closing when we walked into Ethan Allen and bought 10,000 worth of furniture. It did NOT affect us at all. Funny that I see the exact same concern I had 3 years ago. Go ahead and get your furniture.

2 weeks is usually fine... as most companies take 30-45 days to report the new debt. However, just because you were lucky does not mean everyone will be.

If you have good credit, most lenders will not repull it prior to closing if the old report is <90 days old. If you have weaker credit, they may ask if it is >30 days old to make sure it did not get worse.

If they see the new debt.... they will use the new minimum monthly payment in your debt-to-income. If it was close to the limit, this could cause denial of the mortgage. As stated previously, if they even see an inquiry they may ask for a letter explaining if you have taken on new debt.

I have had this happen a few times when buyers were looking to refi auto loans. The lender wanted a letter stating that the buyer did not buy a new car. If they had, they would need the payment info. If you did buy furniture or a car and write a letter stating you did not, this IS MORTGAGE FRAUD. You must disclose debt and you are signing that the informaion is accurate... so if you lie about taking a new furniture or car loan it is fraud.

Lenders can and may check your bank account, employment, income, credit and other factors up to the day of closing. I have seen clients get denied for buying cars, quitting jobs and spending all of their savings. Yes, you may get lucky... but why risk losing you home?

Then where would all that furniture go??

[TimtheGuy]

Originally Posted by filo74

What a funny question, back when I was married, my wife and I were getting ready to close on our new home...we were about 2 weeks away from the closing when we walked into Ethan Allen and bought 10,000 worth of furniture. It did NOT affect us at all. Funny that I see the exact same concern I had 3 years ago. Go ahead and get your furniture.

There are many buyers, especially first time homebuyers who can disqualify themselves right in the middle of their home purchase by taking on new debt!!

Now, if you are no way near approaching the DTI max. for your new mortgage, go ahead and buy away.

[TimtheGuy]

Originally Posted by filo74

What a funny question, back when I was married, my wife and I were getting ready to close on our new home...we were about 2 weeks away from the closing when we walked into Ethan Allen and bought 10,000 worth of furniture. It did NOT affect us at all. Funny that I see the exact same concern I had 3 years ago. Go ahead and get your furniture.

Surely you don't think financing is a "one size fits all" deal??

[TimtheGuy]

Originally Posted by filo74

What a funny question, back when I was married, my wife and I were getting ready to close on our new home...we were about 2 weeks away from the closing when we walked into Ethan Allen and bought 10,000 worth of furniture. It did NOT affect us at all. Funny that I see the exact same concern I had 3 years ago. Go ahead and get your furniture.

There are many buyers, especially first time homebuyers who can disqualify themselves right in the middle of their home purchase by taking on new debt!!

Now, if you are no way near approaching the DTI max. for your new mortgage, go ahead and buy away.