This time of year is usually very busy. Holiday parties, shopping, family visits, trips, etc. – everything can be quite blurry. A fun blur, of course. It would be nice if some things could stand still while the blur was happening. Who wants to think about their finances, bills, and saving money this time of year? Unfortunately, it can be difficult to take the time, energy, and potential sacrifices required to keep finances online. However, just because it’s a challenge doesn’t mean it should be ignored. Being aware of what’s going on can make it easier to control finances without sacrificing all the fun.
Let’s start with some tips to remember when shopping this season….
- Number one: Shop. I say this for two reasons. First, the economy is heavily dependent on consumer spending, so if we all buy less, and therefore spend less, we (as a market) could miss the forecast and inadvertently negatively affect long-term interest rates. Second, store prices. Don’t buy blindly. Plan your purchases and find the most competitive price and ask your preferred supplier to match it.
- Number two: Beware of “counter discounts”. Do not accept, unless you absolutely need to, an offer from a retailer asking if you would like to open an account to receive 10%, 20% or more on your purchase. Depending on the size of your purchase, the compromise just isn’t worth it. From a credit score standpoint, you will register a loan application and a lower amount of credit will likely be issued just to cover the purchase you make. Interest rates on these types of accounts are generally above 20%.
- Number three: If you use your credit cards, try spreading your purchases across several different credit cards. Some people have a lot of credit available on a credit card (for example, a $ 20,000 limit card that never has more than $ 1,000 owed). For those who don’t have an individual card limit in this example or higher, you want to make sure that you don’t exceed a bill cycle balance that is more than 30 percent of the card limit. (For example, if your credit card limit is $ 1,000, don’t have an outstanding balance greater than $ 300.) It’s easy to use credit cards and even easier for credit cards. ‘accumulate during this time of year. Even if you plan to pay the full balance once the statement is issued, the balance continues to function normally and regardless of the cycles they are reported to the credit bureaus. Any credit balance exceeding 30 percent of the limit usually warrants a reduction in score.
These tips will help you if you are in the middle of or about to start a mortgage process. Loan companies withdraw credit at the start of a loan application and periodically at the end of the underwriting to ensure that no new debt is established in the process. Avoiding credit checks, opening new accounts, and monitoring your balances can protect your scores and eliminate any underwriting problems.
Increased vacation spending (through the use of credit cards, cash on hand, or withdrawals from your savings) can also affect you if you don’t buy or refinance until spring. Higher credit card balances equate to higher minimum payments and this can change your debt-to-income ratios. Higher use of cash on hand or depleting vacation savings can reduce your ability to make a potential down payment when the time comes to act.
Have fun and enjoy this time of year. But know that as consumers it is important for us to understand our individual circumstances and our financial goals. Call me or my team at Fountain Mortgage with any questions regarding your mortgage needs. If you are about to start your home loan research, I will provide you with a full analysis so you can have complete confidence from start to finish. Call 913.745.7000 or email [email protected]