The holiday season is upon us! It’s easy to get caught up in the holiday spirit and find yourself overspending as you shop for all those perfect gifts for friends and family. But if you’re planning to purchase a home in the next few months, it’s important to not go overboard. It can be challenging to recover from financial missteps of holiday buying and may impact your ability to secure a home loan.  Here are a few ways to avoid those missteps and help ensure a smooth process when you apply for that home loan in the near future.

• Avoid applying for new credit cards

You may be tempted to open new credit cards during the holiday season, particularly when stores offer you significant discounts off your purchase. Resist the temptation. Opening a new line of credit requires a credit inquiry which could potentially ding your credit. Additionally, your debt-to-income ratio could become impacted, making you seem a greater risk to mortgage lenders.

• Keep debt levels stable

Avoid major purchases like a new car or living room set. You want to keep your debt-level stable until your home buying process is complete. New debt may bring your credit score down and affect your qualification for a mortgage loan.

• Avoid moving large amounts of money

Lenders need to be able to see how you manage your money. Handing out or receiving large amounts of cash over the holidays could trigger a red flag. Lenders may become suspicious about any unusual withdrawals or deposits. Mortgage lenders prefer consistency when it comes to financial management.

• Pay your bills

According to a 2016 article on US Saving Habits, “approximately 26% of adults have no savings set aside for emergencies”. This statistic paired with the National Retail Federation’s Holiday Consumer Survey stating that consumers are expected to spend an average of $967.13 this holiday season, means paying bills could be difficult for some in the new year. If you are planning to purchase a home, your bill payment history needs to be exemplary; it comprises 30 percent of your total credit score. Therefore, it is imperative to make sure that all your bills are paid on time and in full.

Be creative and mindful this holiday season. Identify ways you might overspend, set a budget and be mindful of sticking to it. Find creative ways to enjoy the spirit of the season with family and friends while curbing your spending. Bake goodies with the kids to give to friends and neighbors. Suggest a novel gift or ornament exchange with a modest price range. Host a potluck caroling party with friends in lieu of an expensive dinner out. And all the while you are striving to stick to that holiday budget, be mindful of the ultimate gift of purchasing a new home in the new year.

For all your real estate needs, please contact Belinda Jacobson-Loehle at Jacobson Realty and Home Staging today.

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