Christmas Spending and Mortgage Approvals
It’s that time of year again. The malls and stores downtown are full of shoppers, rushing around trying to get their holiday shopping done.
This is also the time of year when many Americans are putting a lot of purchases onto their credit cards. Their convenient, and you can buy friends and family the gifts you’d like to buy them, instead of the gifts you can actually afford. Paying a couple hundred dollars a month for the next several months is a lot easier than parting with a thousand dollars or more in the span of a couple weeks.
The only problem is that using an extensive amount of credit can damage your chances of getting a great rate on your mortgage, or even prevent you from qualifying at all.
The credit report the mortgage lender sees lists all of the debt you currently have. This amount is compared to your current income, your savings, and any other money you have available. Overdue debts, defaulted loans, and other negative marks on your report count against you, as does using the majority of your credit limits.
When you go all out on Christmas, you begin to push a little closer to those credit limits. You also put yourself in the position of possibly not being able to pay back the monthly payments. If you lose your job, have any unexpected costs, or even owe more than you can pay, it’s not hard to quickly fall behind, potentially trashing your credit.
If you are planning on buying a home in 2010 (which, if you want to take advantage of the buyer credit, low sale prices and low interest, is probably a good idea), you need to start planning now. Get your finances in order, start paying off debts and placing money aside.
That might mean cutting back on Christmas spending. Shop sales, trim your gift lists, and try hand making some presents. Consider going in on a group gifts or celebrating with a Secret Santa to reduce the number of gifts you feel obligated to purchase.
Try not to spend any more than you can afford, right now. Leave the credit cards at home, and buy what you can with cash. Make a game of it, and get creative. You might come up with gift ideas you would never have thought of if you were free to spend whatever you wished.