Your Mortgage: How to stay (financially) fit during the holidays

This time of year is usually very busy. Holiday parties, shopping, visiting with family, traveling, etc. – it all can be quite a blur. A fun blur, of course. It would be nice if some things could stand still while the blur happens. Who wants to think about finances, bills, and saving money during this time of year? Unfortunately, it can be challenging to take the time, energy, and potential sacrifices necessary to keep finances in line. However, just because it’s a challenge doesn’t mean it should be ignored. Being cognizant of what’s going on can be easier to keep finances in check without sacrificing all of the fun.

Let’s start with a few 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 shop less, and thus spend less, we (as the market) could miss forecasts and unintentionally negatively affect long-term interest rates. Secondly, shop prices. Don’t buy blindly. Plan purchases and find the most competitive price and ask your preferred vendor to match it.
  • Number Two: Watch out for “counter discounts.” Do not – unless you absolutely need to – accept an offer from a retail associate asking if you want to open an account to receive 10 percent, 20 percent, or more off on your purchase. Depending on the size of your purchase, the tradeoff just isn’t worth it. From a credit score perspective, you will log a credit inquiry and a lower credit amount most likely will be issued simply to cover the purchase you are making. The interest rates on these types of accounts are typically more than 20 percent.
  • Number Three: If you are leveraging your credit cards, try to spread out your purchases over a few different credit cards. Some people have plenty of credit available on a credit card (e.g., a $20,000 limit card that never has more than $1,000 owed). For those that don’t have individual card limits at this example or higher, you want to make sure you are not exceeding a billing cycle balance of over 30 percent of the card’s limit. (For example, if your credit card limit is $1,000, do not have an outstanding balance greater than $300.) It’s easy to use credit cards and even easier for charges to add up during this time of year. Even though you may plan to pay the full balance off once the statement is issued, the balance still cycles as normal and whatever cycles are reported to the credit bureaus. Any credit balance exceeding 30 percent of the limit usually warrants a score reduction.

These tips will help you if you are in the middle of a mortgage loan process or about to start one. Lending companies pull credit at the onset of a loan application and periodically at the end of underwriting to make sure no new debt is established during the process. Avoiding credit inquiries, opening new accounts, and monitoring your balances can protect your scores and eliminate any underwriting issues.

Increased holiday spending (by use of credit cards, cash on hand, or taking from savings) can also affect you if you aren’t buying or refinancing until closer to spring. Higher credit card balances equal higher minimum payments and that can alter your debt-to-income ratios. Higher usage of cash on hand or a depletion of savings from the holidays can reduce your ability for a potential down payment when it comes time for you to act.

Have fun and enjoy this time of year. But be aware that as consumers it is important for us to understand our individual situations and financial goals. Call me or my team at Fountain Mortgage for any questions related to your mortgage needs. If you are about to start your home loan search, I will provide you with a comprehensive analysis so you can have total confidence from start to finish. Call 913.745.7000 or e-mail mmiles@fountainmortgage.com.

This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268