November 26, 2014
This week, shoppers brace themselves–and their credit cards–for Black Friday and the official start of the holiday shopping season. If you are in the planning stages for an FHA home loan or a refinance loan, there may be some considerations to make when it comes to your holiday spending. At least where your credit cards are concerned.
The holiday shopping season is probably the time of year when it’s most tempting to apply for a new credit card account or even multiple accounts. But opening new lines of credit when you’re just about to apply for a new home loan or refinance loan is a bad idea.
Your debt-to-income ratio can suffer when new lines of credit are opened, and a lender may need to consider both the used and unused portion of your credit limit. What’s your potential debt with a new credit card? How could THAT affect your debt to income ratio?
Holiday spending inflates the debt factors for many people, but that’s only one part of the picture–some feel tempted to skip payments on some bills this time of year in order to free up cash for the holidays. This can definitely hurt a borrower as the lender will be looking for a 12-month (or better) pattern of on-time payments when it’s time to process your credit application for the loan.
Preparing for an FHA home loan isn’t always easy–you have to pull your FICO scores, watch your payments carefully, and save up for the fees associated with the loan. But in the end, it’s definitely worth the extra effort. Keep a sharp eye on both your credit and your payments this holiday season and when it’s time to apply for the new loan you will see the benefits.
Do you have questions about FHA loans? Ask us in the comments section. All questions and comments are held for moderation.
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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