Can “Eat Now, Pay Later” Services Like DoorDash Affect Your Mortgage Application?

As convenient as "Eat Now, Pay Later" services like DoorDash’s pay-later options can be, they might unexpectedly impact your real estate mortgage application. While it may seem like a harmless way to enjoy meals now and settle the bill later, it’s essential to understand how such financial behaviors can influence your eligibility for a home loan. Let’s break it down:

1. Impact on Credit Usage

When you use pay-later services, they may report your activity to credit bureaus. This can affect your credit utilization ratio—the percentage of available credit that you’re using—which plays a significant role in your credit score. A high utilization rate could lower your credit score, potentially making lenders hesitant to approve your mortgage or offer favorable terms.

2. Debt-to-Income Ratio (DTI)

Your debt-to-income ratio is a critical factor in mortgage approval. This ratio compares your monthly debt obligations to your gross monthly income. Using pay-later services adds to your financial obligations, even if they seem minor. When lenders see additional debts, it could increase your DTI, making it harder to qualify for a mortgage or reduce the loan amount you’re eligible for.

3. Perception of Spending Habits

Frequent reliance on pay-later services might raise red flags for lenders. They may view it as a sign of financial strain or impulsive spending habits, especially if these transactions occur regularly. This perception can lead lenders to question your ability to manage a larger financial responsibility like a mortgage.

4. Potential for Late Payments

Late or missed payments on buy-now-pay-later services can harm your credit score. Even a single late payment can remain on your credit report for years, impacting your ability to secure a mortgage or qualify for a competitive interest rate.

How to Protect Your Mortgage Application

If you’re planning to buy a home soon, here are a few tips to avoid complications:

• Limit New Financial Obligations: Refrain from using pay-later services or opening new lines of credit during the home-buying process.
• Monitor Your Credit Score: Regularly check your credit report to ensure there are no negative marks or inaccuracies.
• Pay Balances on Time: If you do use a pay-later service, make sure to pay it off promptly to avoid any potential impact on your credit.
• Focus on Savings: Use this time to strengthen your savings and improve your financial standing, which will make you a more attractive candidate to lenders.

Final Thoughts

While DoorDash’s "Eat Now, Pay Later" service and similar options can be convenient, they are not without financial risks, particularly when you’re preparing for a significant investment like buying a home. Lenders evaluate your financial habits closely, and even small decisions can have larger implications. By staying mindful of your credit usage and managing your obligations responsibly, you can set yourself up for success in achieving homeownership.