November 30, 2016
Holiday credit card use tends to spike, and those considering 2017 home loans should take this into account when planning for a new mortgage loan application. Your credit card debt affects your debt-to-income ratio, which the lender will calculate at application time. That ratio, called DTI for short, is a very important factor in home loan approval.
For some borrowers, the amount of credit card debt, even holiday spending, isnt as much of a problem as timely payments. Some consumers are tempted at holiday time to skip payments in order to free up some much-needed cash, but a missed payment within 12 months of your FHA mortgage or refinance loan application is not a good thing.
Financial experts recommend borrowers maintain on-time payments with no late or missed payments for a minimum of 12 months leading up to your home loan application. This also applies for those seeking cash-out refinancing as well as for new purchase loans.
The lender is required to check your credit reports for patterns of creditworthiness, and if your payment habits are spotty at holiday time, this may be a red flag to your loan officer.
Those who arent sure how to plan or budget for a home loan in 2017 should consider contacting the FHA directly at their toll-free number (1-800 CALL FHA) to request a referral to a local, HUD approved housing counselor who can help borrowers with pre-purchase planning issues including budgeting, credit, and what to expect from the lenders credit check.
The best overall advice is to resist the urge to skip payments at holiday time, keep your credit card balances as low as possible, and very importantly, avoid applying for new lines of credit leading up to your home loan application.
Applying for more credit may also be a red flag for a lender, especially if a borrower is concerned that FICO scores or other credit report data may be borderline. 2017 home loans may require a bit of extra planning with holiday spending underway, but the effort is definitely worth it.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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