Why You Should Avoid Major Purchases During the Home Buying Process

If you’re in the middle of buying your first home, you’ve probably heard how important it is to stay on top of your finances. But here’s one piece of advice you really need to take seriously: don’t make any major purchases until your escrow is closed. This means no new cars, no co-signing loans, and no charging big-ticket items to your credit card—at least not until the deal is finalized. Here’s why.

What Happens During the Approval Process?

When you’re first pre-approved for a mortgage, your lender takes a good look at your financial situation—your income, debt, credit score, and savings. Based on that, they’ll tell you how much home you can afford. For example, you might be pre-approved for a $600,000 home. Sounds great, right?

But here’s where things get tricky: after you’re pre-approved, there’s still a final underwriting process that takes place before you can close the deal. This happens just a few days before your closing date. The underwriter will recheck everything—your credit, your income, and your debt—just to make sure nothing has changed.

Why Major Purchases Can Ruin Your Home Buying Plans

The problem is that if you make a major purchase or take on more debt during this period, it can mess up your approval. For example, let’s say you buy that new Ford F-150 truck you’ve been eyeing for months. Suddenly, you’ve added a $700 car payment to your monthly expenses. When the underwriter runs your credit again, they’ll see that new debt, and it could make you ineligible for the loan.

It doesn’t just apply to car purchases. If you rack up a bunch of credit card debt buying new appliances, furniture, or anything else for your new home, it could be enough to push your debt-to-income ratio out of the acceptable range. That means the lender might not approve you for the mortgage anymore, or they might lower the amount you’re approved for.

Co-Signing Can Have the Same Effect

Co-signing for a loan, even if it’s for a family member or friend, can also mess with your loan approval. When you co-sign, you’re essentially agreeing to be responsible for that debt if they can’t pay. To the lender, this is the same as you taking on that debt yourself. If you co-sign for a car loan or a student loan while you’re in escrow, it could prevent you from qualifying for your mortgage.

The Solution: Wait Until Escrow Closes

It might be tempting to make big purchases or help out a loved one by co-signing a loan, but if you’re serious about closing on your home, wait. Your escrow isn’t officially closed until the grant deed is recorded with the county, which happens on the day your loan is finalized. Only then can you breathe easy and start making those purchases.

Until then, keep your finances as stable as possible and avoid any new debt. If you really want to help out a friend or family member, let them know you’re happy to support them after your escrow has closed. Your dream home will still be there!