Can I use my credit card while buying a house?

Why you should avoid spending up big on your credit card when you are in the process of buying a house.

Can I use my credit card while buying a house?

Yes, but here’s three reasons why you need to be careful how you use your credit card while you are in the process of buying a house.

Using your credit card before applying for a home loan

Be careful how you use your credit card while house hunting, during the months leading up to applying for a home loan. When applying for a home, the lender will want to know three things regarding your credit card use:

  1. Have you been living within your means and paying it off each month?
  2. Can you realistically afford the monthly repayments on a mortgage while continuing your typical monthly repayments on your credit card?
  3. Is your credit report free of any missed payments or late payments on your credit card bills?

If you answered “Yes” to all three questions, then it is likely that the lender will view your home loan application favourably. But if you have been carrying a balance on your credit card without paying it off, or if you have a history of late payments on your credit card bill, then this is a sign of financial stress. In that case, it would be unlikely that the lender would approve your home loan application.

Check out our home loan application checklist here.

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Using your credit card before settlement

using your credit card before settlement

So you’ve got pre-approval on your home loan and you’re about to settle on the house or investment property of your dreams? Be sure to keep your level of credit card spending the same if you can.

Pre-approval is conditional approval, meaning that the lender can change their mind and reject your loan application before settlement. If the lender sees in your card activity that you’ve been spending up big on thousands of dollars’ worth of furniture for the new place you don’t technically own yet, this raises red flags.

If you are considering making some large purchases in this timeframe, think about how much you will be paying in interest if you can’t repay your card balance immediately. Can it wait?

Consider whether you could realistically afford to repay your credit card and pay the costs of settlement, such as legal fees.

Using your credit card while trying to repay a mortgage

using your credit card while trying to repay a mortgage

Your home loan was approved on the condition that your usual level of spending continue. Ask yourself whether you can afford to repay your usual level of credit card spending, and repay your monthly mortgage payments, and pay the usual costs of living (groceries, fuel or public transport, school fees), and maybe even save for unexpected emergencies. If you can afford these costs of living, then your lender should have no problem with you using your credit card while repaying your mortgage.

Nobody wants to end up in mortgage stress, struggling to repay both their home loan and their credit card. If you need tips on beating a credit card crisis, read this article. Or for more tips on how to save enough money to pay all your bills, visit our Budgeting & Saving page.

Is your credit card or home loan costing too much?

If your current home loan is costing you too much or doesn’t have the features you need, you don’t have to put up with it. Compare your options on the Canstar website – we research and rate more than 1,100 home loans every year:

Compare home loans with Canstar

The same goes for your credit card. If you know your usual spending habits, you can use our website to compare credit cards suited for your spending profile and hopefully find one with a lower rate and lower fees:

Compare credit cards with Canstar

 

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