If you're close to buying a home in the coming year, then you'll want to keep an especially close eye on your holiday spending - you don't want to hamper your chances of getting a loan, and you'll want to be sure you have plenty of cash on hand in your first year of homeownership.

The International Mass Retail Association in a late October survey estimated that holiday shoppers will spend an average of $863 on gifts this year. However, they ultimately end up spending some 15 to 30 percent more, the association says.

Because your credit history is so important in obtaining a loan, you'll want to refrain from opening any credit accounts for major appliance or electronic purchases. You'll also want to avoid running your existing credit cards to their limits.

Why? When you apply for a mortgage, the lender may request a credit score as well as a credit report. A credit score is a computer-generated number that indicates your ability and willingness to repay a debt based on your credit record.

Your credit score is one of the pieces the lender will consider in determining whether you're approved for a loan. Your credit score may also be used to determine the mortgage interest rate.

For example, says Freddie Mac, if you charge up to the limit on your credit cards - even if combined they don't add up to a lot of money - this might hurt your credit score. Or, if you have recently applied for a number of credit cards - even if you haven't begun to use them yet - your credit score might be affected.

However, if you show a pattern of managing your credit wisely, keeping credit card balances low and paying your bills on time consistently, your credit score will be positively affected.

Also, try your hardest to keep from using credit to pay for holiday gifts. Also, don't be tempted to take a holiday dip into the money you've set aside for a down payment for a house.

You may think you have that 3, 5, 10, or 20 percent down payment, but you'll also need to have some cash available for closing costs, which will usually run between 2 and 7 percent of the property's value. Closing costs cover taxes, recording fees, inspections, prepaid loan interest, title insurance, financing costs, and points - the dollar amount paid to a lender for obtaining a lower interest rate on a loan.

In addition to the down payment and the closing costs, you'll need to have some cash to move, for homeowners insurance - the Insurance Information Institute estimates that homeowners will spend an average of $603 in 2003 on homeowners insurance - property taxes, and maintenance and repairs. And don't forget furnishings and other household items once you move in.

So, with that in mind, the best thing to do as you tackle your holiday shopping is to plan ahead and do your homework.

The National Foundation for Credit Counseling, which helps more than 1.5 million households annually, offers the following tips to stay on financial course this holiday season:

Pay off any debt in full in January. Try to limit credit card use during the holidays, but pay it off once you receive your first-of-the-year statement.

And next year, once you own your own home, you may want to take advantage of a Christmas savings club in which you set aside a certain amount of money each month to spend on gifts in December. Or you may be eligible to take advantage of Fannie Mae's "power payment" mortgage, a pilot project win which every so often, twice a year and up to 10 times during the loan term, you can skip a payment and not incur a late penalty or credit-report black mark.

Published: December 9, 2002

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