Sample ImageGetting a new credit card while applying for a Treasure Coast mortgage can complicate your mortgage application. A new card can negatively impact your credit score, which plays a huge part in qualifying for a loan and getting the best rates. Stop and read on if you’re considering opening a new credit card account and buying a house simultaneously.

What Mortgage Lenders Look For

If it’s your first time buying a home, you may be surprised at how it’s more challenging to qualify for a mortgage than other types of loans. Home loans are usually big, posing a huge risk for lenders. For that reason, lenders are more cautious and will do a lot of digging into your finances. Which includes:

  • A detailed review of your credit reports.

  • Verifying your employment and income (lenders usually require you to provide supporting documentation for both).

  • Lenders will check your FICO score.

  • A review of your assets.

  • A calculation of your DTI ratio.

To qualify for a mortgage, you must show lenders the best possible picture of your financial standing. Make sure that your financial situation is steady between your initial application & finalizing of all the documents before you contact a mortgage broker.

Why Opening a New Account is a Bad Idea

Applying for and opening a new credit card account can cause your credit score to dip, which is an important consideration if you’re about to apply for a home mortgage.

  • A new credit card application can leave a dent in your credit score. When you apply for a credit card, the credit card issuer will review your credit score & report, which leads to a hard inquiry. A hard inquiry can take a few points off your credit score and will stay on your credit report for two years. The effect of a hard inquiry usually disappears after several months.

  • New credit activity can decrease your FICO score. FICO, a data analytics company, looks at how many recent inquiries show up on your credit report and how recently you made a new credit card account. Opening numerous accounts can come across as risky behavior & could negatively impact your score. Recent credit activity makes up 10% of your FICO score.

  • A new account can cause a drop in your average age of accounts. The length of your credit history and the average age of your accounts generally account for 15% of your FICO score.

Conclusion

By now, you know that getting a new credit card during your mortgage application process is not the best move. You should wait a few weeks after closing to apply for a new credit card account. It’s also a great idea to track your credit reports & scores in the months leading to your loan application.

If you’re ready to take the next step towards buying your dream home, work with loan officers from Element Funding Home Loans of Treasure Coast to make your dream a reality.