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18 Feb

Can I Put Closing Costs on a Credit Card?

Posted February 18th, 2008 | View Comments

Chances are, no. If you want to get a cash advance and have that money sit in your bank account for a while and “season” you could potentially do that. However, be forewarned that you would have to disclose that part of your “down payment” is borrowed and the lender might not like that.

We also warn buyers not to make any drastic changes to their credit while they are in the process of buying a home. For example, don’t buy furniture on credit, or clothes on credit. In fact, don’t use your credit cards at all for about a month between applying for a mortgage and closing on it. The reason for this is that there is usually a last credit approval done before funding during escrow. If your credit is already low or just average, this change in your credit situation might sink your scores lower than the lender wants to see and deny your loan on day 30 of escrow.

So, your best bet is to either get the closing costs paid by the seller and have the amount added to your loan figure or save up to 5% of the total purchase price before you decide to look for a home.

  • http://www.uneasyrhetoric.net uneasy rhetoric

    I agree that putting closing costs on a credit card is silly, but does the advice to not use credit cards at all apply to everyone, or only those with sketchy credit? I ask because my credit card is my principal non-cash payment tool — in fact I pay most of my regular bills with it — but I also pay it off every month and haven’t carried a balance for more than one month in almost three years (and that was an error on their part, not mine. They waived the interest charge).

    Should I, who has excellent credit, nevertheless heed your advice before closing on a mortgage?

  • http://www.sacramento-home.com/real-estate-agents/ John Lockwood

    Hi John,

    At the risk of answering your question on Purva’s article… It’s not so much that you can’t use credit cards at all, as you don’t want to do anything that will change your credit scores. For example, one of the inputs into your credit scores is how much you borrowed as a percentage of your available balance. So (for example) if you have a $3,000 credit line on a given card, get into escrow, and buy a $2,900 flat screen TV, you might be asking for trouble, especially if your credit scores are on the borderline of what they need to be for whatever program you’re applying for. If on the other hand you have FICO points to spare and put $79.00 worth of Borders and another $200.00 of whatever on your $5,000 limit credit card, you’re probably fine.

    Again, the impact of using your cards is greater 1) the lower your scores are already, and 2) the closer to your available balances you are. Since as you say you have excellent credit, you’re probably quite alright, especially if you’re charging small amounts relative to your limits.

  • http://www.uneasyrhetoric.net uneasy rhetoric

    pshew. That’s a load off. I don’t go anywhere near my limit. I just hate the rigmarole of changing how I pay for things.

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