Stash your plastic when closing on a home

You can jeopardize your mortgage with a big spending spree before the deal's done

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for

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Question for the expert

Dear Opening Credits,
Hi, Erica. I graduated from college last May and have a great job that I love -- lucky, right? Now I'm planning on buying my first house. Nothing big, but it'll be mine. Anyway, I've never had a credit card, but I'll need to get one in order to buy some appliances and stuff for my new place. My question is: If I get it before I close on my house, could that screw anything up for me with my mortgage? -- Olivia

Answer for the expert

Dear Olivia,
I'm actually a little surprised that you were able to purchase a home without having a credit card. Using plastic is typically the fastest way to build a credit history that a mortgage lender would find attractive. Nonetheless, congratulations! Becoming a first-time homeowner is a tremendous achievement.

It sounds like you have financing pretty much in place, and I can understand your not wanting to jeopardize it. I'm glad you wrote, because getting into a lot of new debt can do just that. Before lending you any money, the bank will want to be as sure as possible that you have the means to easily repay. How do they ascertain this? First, by looking at your credit report and scores but then by analyzing your income and expenses. When they know your cash flow as well as your borrowing and repaying history, the lender will be able to determine the size and type of loan you qualify for. If you suddenly acquire new obligations, the entire equation is thrown off, since the upcoming payments will reduce the funds you have available for your mortgage.

Mind that it's not just the financial institution you need to worry about, Olivia. In fact, though it's important to assure them of your security, your main concern ought to be your personal finances. The last thing any new homeowner wants is to be in a precarious financial situation right from the get-go. It is critical that you are comfortable not only with meeting each of your monthly bills but with having enough for occasional and unexpected costs as well. Do not overextend your budget by going bananas and splurging on a warehouse full of expensive furniture and appliances.

Of course, you are going to want to fill your new home with furnishings and other gear. A house devoid of these things is but an empty shell, and it's certainly not homey. So how do you get them without alarming your bank or poking holes into your financial safety net? Here are a few options.

  1. Buy used. New can come later. Search listings on Craigslist and other community websites where people buy and sell pre-owned items or visit garage or estate sales.
  2. Ask for donations. Can your parents or friends offer their castoffs? They may welcome the opportunity to clear out their storage spaces.
  3. Purchase piece by piece. If you must have factory-fresh, go slowly. Buy only what you can afford to pay in cash and then move onto the next item you really need.
  4. Save and buy. Know how much everything will cost, break it down into monthly savings goals and purchase it all when you have the money. 

If you're tempted to use a department store's financing option, set that idea aside for a moment. The purchase will show up on your credit report as a loan and can put the mortgage at risk.

After the house closes, I recommend getting a credit card and using it wisely. This way, you'll create a great credit score, and if you ever want to refinance your mortgage to a lower rate, you will be in a good position to do so. Same goes if you want a second loan to remodel or add an additional room. When you are a homeowner, it always pays to think ahead.

See related: Keeping credit scores clean before you close on a home

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Updated: 12-13-2018