dont-let-holiday-shopping-spoil-your-home-purchaseThe holidays are a time for giving, but if you’re house-hunting during the holidays, you’ll need to be extra careful about your spending, especially if you’ve already been preapproved. Don’t go overboard on purchasing gifts for family and friends, as this can impact the total loan amount you’re approved for, and it could even kill the approval entirely.

Here are a few ways you can ensure you make it all the way from preapproval to purchase with no setbacks.

1. Don’t Apply for New Credit or Collect New Debt

When you’re out holiday shopping, it’s common you’ll be asked to open a store credit card at the checkout. This may seem like a great way to save some extra money off your purchase. However, opening this line of credit requires a hard credit inquiry which could ding your credit in the process. It could also impact your debt-to-income ratio or signal to your lender that you are a greater risk than before.

2. Don’t Move Around Large Amounts of Money

If you give out or receive large amounts of cash for the holidays, make sure that you can thoroughly explain the unusual withdrawals or extra income, especially if they are 50% or more of your monthly income. In addition, during the home buying process, money transfers from account to account will be watched. If you’re a person who constantly shuffles funds back and forth, remember that you have to be able to track the movement of funds. If it cannot be tracked, the money movement could appear suspicious and signal a red flag.

3. Don’t Ignore Your Bills

The average holiday spending rate per person is $805. A recent study shows that one in three American adults has no savings on hand, so it’s no wonder bills become a heavy burden to bear come January. Your payment history composes approximately 30% of your credit score, so a loan preapproval isn’t a pass to be less diligent about maintaining a spot-free bill payment history. In fact, it’s more important than ever to make sure all bills are paid on time and in full. Even just one late payment can have serious effects on your loan approval.

The Bottom Line

If you’ve been preapproved for a mortgage, you’ve successfully cleared one substantial hurdle to becoming a qualified candidate for a home loan. But a preapproval is not the same as an approval. With holiday bargains calling, it’s important to keep the finish line in sight. You wouldn’t want a few financial missteps make your dream of homeownership come to an abrupt stop.

  • By: Draper and Kramer Mortgage Corp.
  • In: Seasonal
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