December 22, 2023
House hunters who want a home in the new year, have many financial issues to worry about. One seasonal issue is holiday spending, and if you overextend yourself in December it can lead to more than financial stress.
Fortunately, there are things you can do to manage credit issues and keep them from being a liability at loan application time.
Don’t Allow Missed Payments
What makes a late or missed payment can vary depending on the creditor. Do you know the current due dates on your bills? Have you arranged to make a partial payment rather than miss the deadline if you can’t make the full payment?
These are all steps that can help you get closer to a loan next year.
Consider How You Pay In 2024
Paying with cash in the new year is a great idea. Yes, not using your credit cards over the holiday season is the best approach for those who want an FHA loan in 2024. But not everyone can be that disciplined over the holiday for a variety of reasons.
Is a high amount of December debt getting you down? Consider putting those cards aside (don’t cancel them) to avoid losing progress on lowering credit card balances.
Remember not to apply for any new credit ahead of your mortgage loan application 12 months before you sign the documents to apply or get pre-approved.
Don’t Be A Stranger
Did you overextend financially during the holiday season? If you now feel the financial squeeze of holiday spending, try contacting your credit card companies to learn what you can arrange to help make affordable payments and avoid late or missed payments.
Working with your creditors can help. It’s a more proactive solution than ignoring the problem until next month, and can help your FICO scores if you make the right arrangements and stick to them.
Missed A Payment?
There is a rule of thumb that borrowers should have 12 months after their last late or missed payment before applying for a home loan, FHA, or otherwise.
It is smart to wait to apply for an FHA loan to make sure you are over that 12-month limit for best results if you have a missed payment on your credit report.
Will an FHA lender reject your loan application for a single late bill payment?
Or will you be offered a more expensive loan? It’s possible that one credit error won’t hurt your overall chances at loan approval, but these issues are examined on a case-by-case basis. A small late payment might not hurt as much as a missed auto loan payment. Your lender will decide.
Shop Around For The Right Lender
Should you assume that one or two lenders turning you down for a past credit issue represent all? No. Borrowers should always shop around for a lender, especially when you have a credit issue or two. You don’t have to have the highest FICO score to be approved for an FHA loan.
But you will need a participating lender who wants to work with your circumstances.
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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