As the holiday season gets underway, many of us get swept up in the excitement of festivities, from family gatherings to gift exchanges. However, if you’re also in the market for a home loan, it’s essential to approach this time of year with added financial caution. Increased spending can raise red flags with lenders. Here’s how to avoid them.
Monitor Your Financial Health
The holiday season often brings increased spending, but it’s essential to keep your financial health intact, especially when applying for a home loan. Lenders are particularly interested in your debt-to-income ratio. That is, how much money do you make and how much debt needs to be paid off? The higher your debt, the less likely lenders are to consider you a good prospect. Before shopping check your credit card statements, If the balances are high, try to pay cash for gifts.
Avoid Large Purchases
Avoid large purchases that can negatively impact your debt-to-income ratio. While it might be tempting to take advantage of holiday sales, remember that significant expenditures can make your financial profile less appealing to lenders.
Avoid New Credit Card Applications
This is the time of year when stores ask you to sign up for their credit cards to get a discount on holiday purchases. Avoid that. They can lower your credit score and complicate your loan approval process as store card interest rates are generally high. It’s crucial to maintain your current credit profile without introducing new variables that could complicate your loan approval process.
Maintain Consistent Bank Balances
Lenders look for financial stability, and large fluctuations in your account can signal instability. To manage holiday spending responsibly, create a detailed budget that includes all anticipated expenses and adhere to it strictly.
Show You Are Financially Responsible
Demonstrating regular savings, avoiding overdrafts and maintaining healthy bank account patterns can significantly improve your financial profile. Regularly depositing money into your savings account and managing withdrawals responsibly shows lenders that you are financially disciplined and reliable.
Clean Up Every Year
Consider implementing a year-end financial cleanup strategy. Reviewing your accounts, resolving outstanding debts and ensuring your financial records are accurate can help you start the new year on a strong footing. This proactive approach not only benefits your home loan application but also sets a solid foundation for your future financial health.
Use Your Financial Savvy to Live in Cypress Green
Once your finances are under control and you’ve purchased those stocking stuffers, visit us at Cypress Green. Our builders offer a variety of home choices sure to fit your needs and your budget. Remember, a new home is a great way to start a new year.