Home Buying and Debt
When buying a home, one of the primary things a person needs to consider is debt. Because of the economic system in which we live, debt will in all likelihood play a large role in your life, if it doesn’t already. Having some idea on how much debt you possess now will greatly aid you when it comes to your home buying prospects, even if the conversation is not exactly fun.
Changes are good that you’ve got some debt in your life already. This can come from a wide variety of sources, but three of the biggest sources are:
- Student Loans
- Car Payments
- Credit Card Payments
When you apply for a mortgage, the amount of debt that you currently possess will enter into the financial institution’s calculations as to whether or not you will be approved for a loan. Too much debt can quickly and terminally sink your loan prospects, although it is also possible that you will be approved for a loan that will be difficult, if not impossible, for you to repay given your debt load. It is important therefore to do some debt calculations on your own.
How much do you owe? To whom? What is the interest? And, most importantly, can you repay it before attempting to buy a home?
Paying off Debt
The single best way to avoid being saddled with far too much debt is to pay off what you can as soon as you are able. There is a good chance that before you begin looking for a home to buy you should first take care of certain loans that remain hanging over your head. As indicated above, this will not only make it more likely that a financial institution will offer you the loan you need, but it will also ensure that you are in a place to be able to withstand the new debt load of your mortgage.
Staying Debt Free (Where Possible)
It might simply not be possible to remain fully debt free, but where you can, do it. This might mean that you can’t buy a new couch right away, or update the kitchen, or even repaint all of the rooms. This is okay! The important thing is to not bite off more than you can chew, financially speaking, and taking some time to recover resources after a home purchase is an effective way to remain free and clear of crushing debt loads.