Can i use my credit card before closing on a house reddit

Your cash to close and closing costs are interconnected but are still different. Closing costs refer to the fees you pay to your mortgage company to close on your home loan. On the other hand, the cash to close is the total amount – including closing costs – that you’ll need to bring to your closing to complete your real estate purchase.

Closing Costs

The specific closing costs you pay depend on your loan type, state, down payment and how much you borrow. A few common fees you might pay are listed below.

Appraisal fees: An appraisal is a professional third-party estimate of how much the home you’re buying is worth. Lenders require appraisals to ensure the house is worth the amount they’re lending.

Attorney fees: In some states, you hire a real estate attorney to finalize your title transfer. The attorney fee covers the cost of having a legal expert look over your paperwork.

Title insurance: Title insurance protects you from third-party claims to your home’s new title. Title insurance companies make sure that the person selling you the home has the rights to the title.

They also search for bankruptcies, liens and other factors that might cause you to lose your home. You only pay for title insurance once during closing and you have protection for as long as you own the home.

Application fees: Lenders charge application fees to process your mortgage application.

Origination charges: Mortgage lenders charge origination fees to underwrite your loan.

Private mortgage insurance: If you buy a home with less than 20% down on a conventional mortgage, your mortgage lender will require you to buy private mortgage insurance (PMI). PMI helps protect your lender if you default on your loan. Once you reach 22% equity in your home, your PMI is automatically canceled. You may pay your first month’s PMI premium at closing.

FHA, USDA or VA fees: If you take out a government-backed loan, you might have to pay a fee to the agency that backs the loan. These fees cover administrative costs and keep the programs going.

  • FHA loans require an upfront mortgage insurance premium of 1.75% and a monthly fee.
  • VA loans may require a one-time VA funding fee, depending on how much you borrow and your service history.
  • USDA loans require an upfront guarantee fee of 1% and an annual fee of 0.35%.

Pest inspection fee: In some states, you must pay for a pest inspection before you can close on your mortgage.

Cash To Close

Cash to close includes the total closing costs minus any fees that are rolled into the loan amount. It also includes your down payment, and subtracts the earnest money deposit you might have made when your offer was accepted, plus any seller credits. Additionally, it includes any refunds for overpayments and other credits. Here’s what makes up the typical cash to close:

Down payment: Your down payment likely makes up a large percentage of your total cash to close. Your down payment is a percentage of your home’s purchase price that you pay upfront to your lender. If you get a certain type of government-backed loan (like a VA loan or a USDA loan), you may not need to have a down payment.

Credits: If you’ve already put down money for your down payment with your lender or you’ve already paid closing costs, you’ll see a deduction in your cash to close. Remember to keep careful records so you can discuss any discrepancies with your lender.

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Can i use my credit card before closing on a house reddit

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Reddit users quickly clear up misconceptions and falsehoods.


Key points

  • Reddit users often have internalized myths or just bad advice about credit cards, and when they post about them, they usually get back useful advice instead.
  • It's a bad idea to take out cash advances or close credit card accounts if you can avoid it.
  • If you're just getting started with credit, you will likely have an easier time getting a secured credit card than an unsecured one.

Reddit is a fascinating place on the internet to get lost in. There are so many subreddits (individual forums) on any topic you can imagine. Naturally, this extends to money topics. r/CreditCards is full of Reddit users with tons of credit card experience, and if you're new to credit cards, it can be a great place to get tips and tricks -- as well as a lot of dos and don'ts.

I dug into r/CreditCards and found some examples of credit card don'ts that Reddit users posed as questions in the forum. Other users were quick to offer the correct advice, and I will discuss it here as well. Read on for credit card pitfalls and how to avoid them.

'I'm going to take out a cash advance to invest.'

One Reddit user was specifically seeking out a credit card that would allow them to take out $10,000 in the form of a cash advance so they could use that money to invest in I bonds. While I bonds can be a good investment (and especially this year, with inflation being high), it's not a good move to finance this investment with a cash advance. High on the list of things you really don't want to do with a credit card is taking out a cash advance.

While this doesn't seem consequential (after all, you're just using your credit card like a debit card to withdraw money from an ATM), it can have big implications for your finances. Your credit card issuer will start charging you interest on a cash advance immediately, and usually at a higher percentage rate than your purchase APR. You'll also be charged a cash advance fee, often in the amount of 3% to 5% of the advance amount. So even if a credit card offered a $10,000 cash advance, there'd be a fee of $300-$500 immediately. Finally, you won't earn rewards or cash back on a cash advance.

It's best to avoid cash advances, unless you have a serious need for a small amount of money and would be in a pinch without it (or would have to resort to taking out a payday loan, which is another bad idea).

'I want my first credit card to be this particular one.'

Another Reddit user asked for help in obtaining their first credit card at age 18. They did some research and identified a few cards to apply for and ultimately didn't get approved. While researching credit cards ahead of applying for them and trying to find the right fit for you and your finances is a great money move, when you're first getting started as an adult, this may not work out for you.

Other Reddit users made suggestions, such as applying for a student credit card, or trying for a card with certain issuers who are known to be friendlier to young people just getting started with credit. Others recommended a free credit-monitoring service to help the poster get a handle on checking their credit reports, and some also suggested starting with a secured credit card.

Secured credit cards are a great way for students to get started with using credit. Your card's limit will be the amount of the deposit you make to the issuer, and as you spend that money and repay the card (ideally, in full and on time) every month, you're building credit, and may eventually be able to graduate to an unsecured credit card. If you're just starting with credit, don't assume you'll qualify for the card you have your heart set on. Start small and build up your credit.

'I got the wrong card and want to cancel it.'

Finally, one Reddit user acknowledged they had accidentally ended up with the wrong credit card. They had been trying to keep cards with just one issuer, and already knew the rules for that issuer regarding transferring cash back into travel points. Unfortunately, their new credit card was with a different company that has different rules. The poster wondered how to cancel this new card, or even if it was a good idea. Other users stepped up to note that canceling the new card wasn't a good idea, for a few reasons.

Opening a new credit card and abruptly canceling it soon after will likely raise red flags with a credit card company, as they are often attuned to possibly fraudulent behavior. And if the Reddit poster wanted to open a different card with that issuer, they may have trouble getting approved. Plus, closing a credit card account is often detrimental to your credit score, as you're both reducing the average age of your accounts (granted, in this case the account was brand new) and your available credit limit.

Instead, it may be a better idea for the Reddit user to keep the card account and use it for a small purchase or bill payment every few months so that the card history and available credit limit continue to give their credit score a boost. If the card was one with an annual fee, they could contact the issuer and see about the possibility of downgrading to a no annual fee card so they don't end up needlessly paying for a card they don't plan to use often.

There are an awful lot of potential pitfalls with using credit cards. Thankfully, Reddit is here to clear up any misconceptions about them that users may hold. Where else can you ask a question or state a claim and immediately get help from anywhere in the world?

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About the Author

Ashley Maready is a former history museum professional who entered digital content writing and editing in 2021. She has a BA from Hood College and an MA from Shippensburg University.

Can I use my credit card before I close on a house?

Yes, you can use your credit card before your closing date, but do your best to keep your purchases small and pay off your balance swiftly. In other words: Hold off on purchasing that new furniture, paint or other items in anticipation of your new home until after you've got the keys in hand.

Can I use my credit card right before closing date?

Yes, you can use your credit card between the due date and the credit card statement closing date. Purchases made after your credit card due date are simply included in the next billing statement.

Can I use my credit card 3 days before closing?

You're completely allowed to use your credit card during the grace period. Any purchases you make after your closing date are part of the next billing cycle, not the current one. But if you don't pay the full balance listed on your statement, you'll lose the grace period.

Can I spend money before closing?

Before closing, do not spend an additional amount of money on anything unnecessary. Make sure all bills are current and not delinquent. Although the loan may only be listed under one account, the bank looks at all accounts.