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  • Writer's pictureAmy Kaiser

Why You Should Avoid Big Purchases Before Buying a Home: The Financial Impact

Updated: Apr 18, 2023


Stacks of money as a warning sign and text that reads 'Why You Should Avoid Big Purchases Before Buying a Home: The Financial Impact

Buying a home is one of the most significant investments most people will make in their lifetime. It's an exciting time, and getting carried away with planning and dreaming about your future in your new home is easy. However, it's essential to be financially responsible and not make significant purchases before buying a home. Here's why.


Firstly, large purchases such as a new car, furniture, or appliances can affect your debt-to-income ratio, which is crucial when applying for a mortgage. Lenders use this ratio to determine whether you are financially stable enough to take on a mortgage. Making a significant purchase before buying a home can increase your debt and reduce the amount of money you can borrow for a mortgage.


Secondly, large purchases can also affect your credit score. Taking on new debt increases your credit utilization ratio, which is the amount of credit you use compared to the amount you have available. This ratio is an essential factor in determining your credit score. Making a big purchase before buying a home can lower your credit score, making it harder to qualify for a mortgage or get a favorable interest rate.


Thirdly, having a significant amount of cash reserves is essential when buying a home. Homeownership comes with additional expenses like property taxes, maintenance, and repairs. If you make a significant purchase before buying a home, you may not have enough cash reserves to cover these unexpected costs, which could put you in a difficult financial situation.


In conclusion, being financially responsible is essential when buying a home. Avoid making significant purchases before buying a home to keep your debt-to-income ratio low, maintain a high credit score, and have enough cash reserves to cover unexpected expenses. Doing so will increase your chances of getting approved for a mortgage and ensure a smooth and successful home-buying process.


Jacob Williamson Realty

Century 21 Affiliated | Realtor

714-408-5379

DRE 02179062

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