How Black Friday Shopping Can Jeopardize Your Home Loan Qualification

The thrill of Black Friday shopping is hard to resist. The promise of deep discounts on everything from electronics to furniture can make it tempting to splurge, especially if you need bigger appliances or furniture for your new house. But if you’re under contract to buy a home, those shopping sprees can spell trouble for your loan qualification. Here’s how Black Friday sales can interfere with your home loan approval—and why you should think twice before indulging in those timely deals.

Increased Debt-to-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is a crucial factor lenders use to determine your ability to repay a mortgage. Financing big-ticket Black Friday items, like a new TV or home appliances, can raise your monthly debt payments. This increase could tip your DTI over the acceptable limit for your loan program, potentially disqualifying you. Even if your new purchase seems manageable, lenders may view the added debt as a risk to your financial stability.

A Drop in Your Credit Score

Black Friday deals often come with enticing offers for store credit cards or promotional financing. However, applying for new credit can result in hard inquiries on your credit report. These inquiries, combined with opening new lines of credit, can lower your credit score. A drop in your score could change your loan terms, such as increasing your interest rate, or worse, disqualify you altogether. When you’re in the process of buying a home, every point on your credit score matters.

Draining Your Savings

Overspending during the Black Friday rush can quickly deplete your savings. Between down payments, closing costs, and reserves required by lenders, maintaining sufficient cash is essential. If you’ve been saving diligently for your new home, splurging on Black Friday deals could leave you short. This could result in delays or even derail your ability to close on your home. Remember, lenders will check your bank accounts to ensure you have the necessary funds.

Unusual Bank Account Activity

Black Friday shopping often involves significant financial transactions, whether it’s charging large amounts to your credit card or transferring money to cover expenses. Lenders carefully monitor your financial activity during the underwriting process. Unusual or unexplained transactions can raise red flags, leading to requests for additional documentation, delays, or even jeopardizing your loan approval.

 A Perception of Financial Instability

Even if your Black Friday spending doesn’t immediately affect your DTI or credit score, it can still signal financial recklessness to your lender. Buying unnecessary items during this critical time may cause lenders to question your ability to manage future mortgage payments. This can weaken your position as a borrower and potentially lead to a denial.

The Bottom Line

If you’re under contract to buy a home, think carefully before jumping into Black Friday and Cyber Monday sales. Avoid financing purchases, opening new credit accounts, or draining your savings until after your loan closes. A little financial discipline now can save you from major headaches later.

When in doubt, consult your loan officer before making any financial decisions. Remember, the best “deal” this season is securing your dream home!

©2024 New Story Lending, LLC. NMLS #2440499 (www.nmlsconsumeraccess.org) 1824 East Main Street, Suite A, Easley, SC, 29640; This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Not all loan products are available in all states. Not all borrowers will qualify. When refinancing an existing loan, the total finance charges may be higher over the life of the loan.  112224