How to Avoid Holiday Debt Before Mortgage Closing

The holidays are approaching and you know what that means: Fun, food, family, and spending money. You feel pressure to choose the right gifts for loved ones and show out-of-town guests a good time.

But, if your loan closing appointment is right around the corner, a change in your financial situation as a result of holiday spending can jeopardize your mortgage.

Here’s how to get through the holidays without affecting your home purchase.

Plan Before You Spend

Lack of planning is the reason many shoppers go overboard and fall into debt, so create a holiday budget to avoid overspending. Make sure to set a spending limit for all holiday expenses including travel, entertaining, decor, and gifts.

Be realistic with your budget and make cuts where necessary. If you plan to travel during the holiday it’s likely the most expensive line item on your budget. You may want to consider spending the holiday at home instead. You can always plan a trip to spend time with family and friends after the peak holiday travel days are over and transportation costs decrease.

Share Your Budget

Let your coworkers, family, and friends know you’re spending conservatively this holiday and agree on a spending limit for gift exchanges. For example, you can set a $50 limit for each person you plan to swap gifts with. It takes the financial pressure away from everyone involved and your loved ones will understand you’re working under budget constraints while buying a home.

Don’t Finance Any Gifts

If you need to fall back on your credit card for a holiday purchase, you probably can’t afford it. Shop with cash to stay within budget, but be careful not to touch money you have set aside for closing costs. A lender can pull out of the deal if you can’t bring enough cash to the table at loan closing.

Avoid opening credit cards or financing gifts because new accounts will hit your credit report and ding your credit score. New debt will also impact your debt-to-income ratio and may disqualify you for the mortgage.

Now, what if you simply can’t avoid using your credit card or you want to use it to earn rewards points?

Make sure you can pay the debt off well before your statement closing date. It’s tough to predict exactly when credit card companies report balances to the credit bureau, but you may able to stop it from showing up on your credit report if you pay it off quickly.

Think Outside of the Box

There’s no rule that says you must spend big during the holiday to enjoy it, so get creative. Think about thoughtful gifts you can make or buy that are inexpensive. Reuse old holiday decorations or try do-it-yourself projects.

Ultimately, this time of year is for sharing experiences instead of spending money. Keep in mind, any sacrifices you make will pay off tenfold when you get through closing and receive the keys to your new house.


Interested in learning more about your mortgage options or prequalifying for a home loan?