Everyone with debt has to find ways to manage it. If your debt is relatively small, you simply need to pay on time every month to ensure it doesn’t spiral out of hand. However, if you’re looking at a larger
debt, you need to make greater efforts to get rid of it while also — especially if you have your sights set on purchasing a home in the next 6 to 12 months.
To help shine a light on reducing debt to achieve homeownership, McDevitt Town & Country offers the following tips.
Refinance Your Debt
Even though not all debt can be refinanced, most of it can. Work with a financial expert on finding a method to refinance your debt and take measures to pay it off sooner rather than later. Refinancing
is a good idea, as it can help break down your debt into bite-sized, more manageable pieces — which, in turn, can give you a fighting chance of improving your credit score.
Lower Your Expenses
Look at your monthly obligations and determine which expenses can be lowered
and cut out entirely. For instance, you can save a few hundred dollars a month by cooking from home or giving up the cable TV. Although these strategies won’t solve your debts altogether, they will make up for the gap other payments create.
Having a budget is also a must. It helps you see the big picture of how your money is moving each month so you can make adjustments where necessary. You can then put what you save towards paying off more of your debt.
Pay Off Debt Quickly
When you are looking to get a mortgage in the near future, it’s a good idea to cut back on credit card spending because it can negatively impact your credit score. Besides paying around 10 percent more
than the minimum amount due per month on your credit cards, consider debt consolidation methods or an affordable
balance transfer. If you can lower interest and fees, you will come out ahead. Also, don’t take on any new debt. This will show on your credit card report, which can be a red flag as you apply for a mortgage.
Study the Market
This year started up with a lot of heat on the real estate market. Keep an eye on market trends and, ideally, stick to one that has more properties than buyers for a better chance of negotiating property prices. You may even score better deals, such as getting the seller to cover closing fees. As part of your research, estimate mortgage payment
variables using an online calculator. This will give you an idea of what you can comfortably afford without being house-poor.
If your debt still needs work and you cannot afford the standard 20 percent
down payment, there are a few methods you can explore. There are alternative loans that might be worth considering, if you are eligible, such as the FHA loan, the VA loan, and the Rural Housing loans. But while it’s entirely possible to purchase a home with a reduced or even no down payment, know that some lenders may require you to get mortgage insurance instead.
The Bottom Line
Being in debt is not ideal, especially if you want to buy a home in the foreseeable future. However, by adopting a few strategies from the ones mentioned, you can manage your debt and afford to buy the property of your dreams. Also, the house hunting and buying process will be much easier by working with an experienced REALTOR. If you plan on moving to the Pinehurst and Southern Pines Area, McDevitt Town & Country can help you find the ideal place. (910) 724-4455