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Just closed on 1st home, Home Depot & Lowes now or later?

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Zahnrosen
Contributor

Just closed on 1st home, Home Depot & Lowes now or later?

My wife and I were fortunate to be able to close on a home recently. We qualified for a bank loan, 20 year term but it has a 29 month ballon. The home appraised at 105k and we were able to get into it for just 65k so we're incredibly happy about that, having good old friends in the real estate business can pay off from time to time. But, the ballon is making us nervous since we don't have 65k in cash to pay off the loan we'll require a replacement mortgage. There's no prepayment penalty so I can stary looking for the new mortgage right away if I like.

 

My question is about caring for the home itself though. I consider it wise to keep a couple of months income in the bank in case of a rainy day. I also think it's wise to have a line of credit for the home in case of emergency. Idealy it would be a HELOC but under the circumstances I'm thinking I'd rather just get a Home Depot and\or Lowes credit card and just use them for small home improvement projects and PIF monthly. If there was a need for a major repair or new appliance then I'd use one of those lines of credit to finance it, then pay off as needed.

 

Considering the situation, what approach would you all recommend? Applying for the Home Depot \ Lowes now, HELOC, just waiting... According to the score simulator in the next couple of months my credit scores shoud rise nicely. They estimate 10-50 points increase in the next 90 days. That would be a nice boost to my current 623 eq fico score.

Message 1 of 10
9 REPLIES 9
GST2008
Frequent Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

The Home Depot card always has great APR promotional offers, like 0% if you send X amount at one time.  My brother and I have some rental property and this is how we regularly finance projects, improvements, and appliances.  He also used it for all the major purchases when he bought his own home.  The accounts been open for years and the promotional offers keep coming in so it's always handy.  Plus, 0% beats anything a bank will offer.  We just bought another property that we are renovating and were able to get 0% for 18 months on all the supplies we needed.  He's an accountant, so I assume he runs the numbers when considering the advantages/disadvantages of the CC vs. a line of credit.


Current:
TU (5/14/14): 796 (Inquiries; 8/23/13)
EQ (3/23/14): 791 (Inquiries: 8/23/13)
EX (9/24/13): 780 (Inquiries: 7/2/12; 11/20/12; 7/30/13; 8/23/13)

Goals: No new inquiries for 2014, 800 for all CRs by 12/31/14
Message 2 of 10
SwiftTone
Valued Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

HELOC generally have better rates. I think its like 2.99%-3.99%

 

If you plan on doing some major home improvement which you can't PIF right away, then HELOC would come in handy. If you have other debt that you want to consolidate into HELOC's lower rate,thats a good option though. However I've seen people do this, them charge up their cards again falling into more debt. As long as you're deviplined about this, you will be fine.

 

Congrats on the new house!!

AMEX: $25,000, CSR: $10,000, Chase Priority Club: $1,500, Freedom: $5000, Freedom Unlimited: $1000, Discover: $21,000, BoA $11,000, WF Cash Wise: $5000

EQ FICO - 753
TU FICO - 755
EX FICO(AMEX) - 766
Message 3 of 10
Zahnrosen
Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

Lol, that looks like one vote for a HELOC and one for the CC's. Smiley Happy

 

One thing that concerns me is the credit score we're talking about. 623 eq isn't that high.

Message 4 of 10
Zahnrosen
Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

Well, 0% APR is pretty much unbeatable.

Message 5 of 10
SwiftTone
Valued Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

Well, you're right. 0% is better. But is the limit on a store CC high enough for the project? Also, 0% is likely to be introductory right? Honestly I'm not familiar with Home Depot or Lowe's cards so I could be completely wrong.

AMEX: $25,000, CSR: $10,000, Chase Priority Club: $1,500, Freedom: $5000, Freedom Unlimited: $1000, Discover: $21,000, BoA $11,000, WF Cash Wise: $5000

EQ FICO - 753
TU FICO - 755
EX FICO(AMEX) - 766
Message 6 of 10
GST2008
Frequent Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

Home Depot offers special 0% apr offers when you make larger purchases in the store.  It doesn't necessarily have to be one large priced item, just the total amount spent. 


Current:
TU (5/14/14): 796 (Inquiries; 8/23/13)
EQ (3/23/14): 791 (Inquiries: 8/23/13)
EX (9/24/13): 780 (Inquiries: 7/2/12; 11/20/12; 7/30/13; 8/23/13)

Goals: No new inquiries for 2014, 800 for all CRs by 12/31/14
Message 7 of 10
StartingOver10
Moderator Emerita

Re: Just closed on 1st home, Home Depot & Lowes now or later?

Don't compound a delicate situation by obtaining a HELOC on your home.

As you know, a HELOC is another mortgage lien on your property. The lien amount is for the full HELOC value, even if you have not drawn down any part of the loan. Naturally, you would only have to repay the outstanding part - but most HELOC's have a small pre-payment penalty even if you never used it. It is just a risk I wouldn't take in your position.

 

IMHO, since you have a rather short balloon, its best to keep all liens and encumbrances off your property, other than the mortgage that you plan to refi in the near term.

When you go to refi your loan, you will fare better with a lower LTV. Right now your LTV is about 62%. If you can get your loan balance down to less than 60% you will have a much easier time to refinance when you decide to refi.

 

In the meantime, work on your scores so you have a wide variety of lenders from which to choose when the time is right for you to refi.

 

BTW, congrats on your new home! It sounds like a fantastic deal for you!

Message 8 of 10
boomhower
Valued Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

I love my Lowes card.  18 month 0% offers come very regularly.  On top of that if make any purchase and don't use a financing promotion you get 5% off the purchase, can't get that with Home Depot.

Message 9 of 10
mygoal750
Contributor

Re: Just closed on 1st home, Home Depot & Lowes now or later?

I have both Lowe's and HD.  Got both in summer of 2010.  Lowe's gave me a higher starting credit line, and gives periodic auto increases.  HD started me low, and has given me requested increases.  I love the 0% financing.  It seems they target the 18-month or 24-month 0% promotions around holidays.  Lowes had 24 month 0% around Memorial Day, where HD had 18-month 0%.  I'm expecting another promotion around July 4th, the again at Labor Day, Columbus Day, Thanksgiving, etc.  So, it's usually 6 weeks between promotions.  That's good to know, if you're planning big projects.  I prefer the 0% financing vs the HELOC.  the HELOC is another lien on your home, like StartingOver mentioned.

 

congrats on the new house!  Enjoy it! 

Message 10 of 10
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