Ask anyone you know and chances are, they have some form of debt. Whether it’s school loans, credit cards, or car loans, these everyday debts can affect your ability to buy a home. However, this doesn’t mean it can’t be done. We’ve already covered the basics, including how your credit score affects your home mortgage interest rate. Now we’re going to explain how to buy a house even when you’re in debt. Wherever you end up, protect your investment with a quality and comprehensive Wright City Home Insurance policy.
Paying off credit cards.
According to Credit Blog, the monies you use to pay off your debt, similar to a purchase transaction, will have to be sourced — and you’ll have to have proof that the obligation has been closed. If possible, pay the credit card in full, learn the date the creditor reports to the bureaus, then apply for the mortgage after the creditor has reported it to the bureaus. Doing this will show the updated balance on the credit report, which will improve real income (revealing less debt), making the process more streamlined.
While it might not be possible to pay the debt in full, showing creditors you allocate more funds than the minimum payment required each month to pay down the balance can show you’re serious about buying a home.
Debt consolidation.
Consolidating debt is another way to qualify for a home loan. This often results in a lower monthly payment-especially if you have good credit. So, why is this important? Consolidating debt gives you more buying more and improves your debt-to-income ratio.
Money Under 30 says your debt-to-income ratio matters a lot to lenders. Simply put, your DTI ratio is a measurement that compares your debt to your income and determines how much you can really afford in mortgage payments. Most lenders will not approve you for a mortgage is your DTI ratio exceeds 43%.
The natural solution is to make more money. This is easier said than done. If you are unable to get a higher paying job, consider FHA loans where the down payment is approximately 3.5% of the home’s purchase price- a lot less intimidating than the 20% that was expected in the past.
About Sine Insurance Group
At Sine Insurance Group, we want to ensure that your belongings and your dwelling are protected. Our custom-tailored rental insurance policies are crafted specifically to meet your needs and provide peace of mind. For more information about our products, contact us today at (636) 947-1177.