"Close First, Then Splurge" From the WSJ

Close First, Then Splurge

The Wall Street Journal, By Jonnelle Marte

June 13, 2010

The mortgage was approved and the closing date is set. Now you can go shopping for those new appliances and furniture, right?

Wrong. More mortgage lenders are pulling last-minute credit reports before the closing date, sometimes even the day before. And sudden changes to credit balances and assets could delay a closing or bump up an interest rate.

That means home buyers -- especially those trying to meet the June 30 deadline to qualify for the home-buyer tax credit -- should keep their credit profiles and liquid assets as unchanged as possible in the time between an initial mortgage approval and a closing, mortgage analysts and credit experts say.

Lenders don't want to see you take on new debt, so hold off on major credit-card purchases -- those that reduce available credit by 5% or 10% or more -- says John Ulzheimer, president of consumer education for Credit.com. So if you have a credit limit of $25,000, keep purchases below $2,500.

Don't apply for new credit cards or other loans. The credit inquiry a lender makes when you apply shows up on your credit report and can affect your credit score.

Also, avoid substantially tapping liquid assets, such as checking and savings accounts and certificates of deposit, says Keith Gumbinger, mortgage analyst for HSH.com, a publisher of consumer-loan information.