How Buy Now, Pay Later Affects Homeownership
Over the past few years, "Buy Now, Pay Later" (BNPL) services like Affirm, Klarna, Afterpay, and similar payment options have become increasingly popular. While they may seem like an easy way to spread out the cost of a purchase, it's important to understand that these services are loans—not simply payment plans.
If you're working toward homeownership, these loans can have a bigger impact than you might expect.
Buy Now, Pay Later Is Still Debt
When you choose a "pay later" option at checkout, you're borrowing money. Even if the payments are interest-free or advertised as a convenient way to budget, the amount you owe is still considered debt.
Some BNPL accounts may not immediately appear on your credit report, but lenders can often identify these payments through your bank statements. Mortgage programs, including those offered through the Tennessee Housing Development Agency (THDA) and insured by the U.S. Department of Housing and Urban Development (HUD), consider these financial obligations when reviewing a loan application.
Why It Matters When Applying for a Mortgage
When determining whether you qualify for a mortgage, lenders evaluate your debt-to-income (DTI) ratio. This compares your monthly debt payments to your monthly income.
Outstanding BNPL balances can increase your monthly debt obligations, which may:
Increase your debt-to-income ratio.
Affect your eligibility for certain mortgage programs.
Delay the mortgage approval process.
Require additional documentation or proof that the balance has been paid in full.
If you're currently preparing to apply for a mortgage through Habitat for Humanity Williamson-Maury or another affordable lending program, you may be asked to provide documentation showing these accounts have been paid off before your loan can move forward.
Our Recommendation
If your goal is to become a homeowner:
Avoid opening new BNPL accounts whenever possible.
Pay off any existing balances as quickly as you can.
If you're unsure whether a payment plan could affect your mortgage application, ask your financial coach or loan specialist before making the purchase.
Building Healthy Financial Habits
At Habitat for Humanity Williamson-Maury, our goal is to help families build a strong financial foundation for long-term homeownership. Making thoughtful borrowing decisions today can help make the homebuying process smoother tomorrow.
If you are looking to shape up your finances and take the next step towards homeownership, through our program or on the traditional market, we encourage you to sign up for our free financial literacy course, The Get Ready Program!