Can I Buy Furniture Before Closing on a House?

Homebuyers often wonder about the best time to purchase large items like furniture for their new residence. Making significant purchases before the final closing on a house requires careful consideration of financial implications. Understanding these factors can help ensure a smooth transition into homeownership without jeopardizing the process.

Impact on Your Loan Approval

Making substantial purchases, especially those involving new debt, can significantly affect your home loan approval. Lenders conduct a final review of your financial situation just before closing to ensure your circumstances have not changed. This re-verification can include a credit check, employment verification, and asset review.

Opening new credit accounts, such as for furniture financing, or increasing balances on existing credit cards can lower your credit score. A new credit inquiry can cause a temporary dip in your score, and higher credit utilization can also negatively impact it. If your credit score falls below the lender’s threshold, it could lead to less favorable loan terms or even loan denial.

New monthly payments from financed furniture or increased credit card debt directly impact your debt-to-income (DTI) ratio. Lenders use the DTI ratio to assess your ability to manage monthly payments, and a higher ratio indicates increased financial risk. While many lenders prefer a DTI ratio of 36% or below, some may approve loans with ratios up to 43% or even 50% for certain loan types, but exceeding these limits can disqualify you. Any significant change in your financial standing or new debt can cause lenders to re-evaluate or cancel your loan, even if you had a pre-approval.

Practical Financial Considerations

Beyond the direct impact on loan approval, acquiring furniture before closing also presents practical financial considerations. Maintaining sufficient liquid cash is prudent for unexpected expenses during the home buying and moving process. These costs can include closing fees, moving expenses, and initial utility deposits. Closing costs alone typically range from 2% to 5% of the loan amount, requiring a significant portion of your available funds.

Protecting your emergency fund is important, as draining it for discretionary purchases like furniture can leave you vulnerable to unforeseen challenges. Homeownership brings potential unexpected costs, such as appliance repairs, minor renovations, or even larger maintenance issues. Experts often recommend having an emergency fund equivalent to three to six months of living expenses, or a cash reserve of 1% to 3% of the home’s value, to cover such eventualities.

Prioritize these potential home-related expenses over new furniture purchases. Developing a comprehensive budget that accounts for all home-related costs before committing to large discretionary items helps ensure financial stability. This approach provides a financial cushion for the transition into homeownership and for addressing immediate needs in the new property.

Timing Your Purchases and Delivery

The safest time to purchase and arrange for furniture delivery is after your home loan has officially closed and the property is legally in your name. Attempting to coordinate delivery to a house that is not yet yours can lead to logistical complications and risks. Property access might be an issue, and you could face liability for any damage that occurs on a property you do not yet own.

Delays in closing are common, and if furniture is purchased or scheduled for delivery before the closing date, it can result in significant inconvenience. You might incur additional costs for temporary storage or face restocking fees if purchases need to be cancelled.

If a purchase must be made before taking possession, temporary storage solutions are available, such as self-storage units or portable storage containers. These options can provide a secure place for your belongings, but they involve additional costs. Waiting until after closing eliminates these logistical challenges and ensures you have full control over your new property.