Typically it is in your best interests to avoid making major purchases while in the market for a home. This is because those purchases could have an impact on your credit utilization and debt-to-income ratios. If these ratios are too high, it may make it difficult or impossible to obtain a mortgage.
Loan approval is not guaranteed until the sale officially closes
Typically, you obtain approval for a home loan days or weeks before the sale becomes official. In the meantime, your lender will keep an eye on your credit report to ensure that nothing changes that could increase your risk of defaulting. If any changes are detected, there is a chance that a financial institution might modify or withdraw its offer.
You may be required to maintain a minimum cash reserve
Traditional mortgage lenders may require that you keep a certain amount of money in your bank account until after your home purchase becomes official. If you make a major purchase, it is possible that you will fall below that threshold. It is worth noting that some lenders check to see how long funds have been in your savings account. Therefore, simply replenishing the money after buying an expensive item might not be enough to remain eligible for a home loan. Your real estate law attorney may be able to further explain any cash reserve requirements that your lender imposes.
If you are planning on buying a home soon, it is important to learn more about the various loan products available to you and their requirements. Doing so may help you avoid mistakes that could potentially delay or derail your chances of becoming a homeowner in the near future.