The modern housing market can be difficult to navigate even under the best circumstances. Low credit and a poor debt-to-income ratio can make things even more difficult. Luckily there are several steps you can take to attain the financial health necessary to purchase a home. Quality Title Group, LLC shares some debt-smashing steps that can help you into a position to purchase your dream home.
Create a Strict and Realistic Budget
Before you begin chipping away at your existing debt, first construct a practical budget to ensure you won’t accrue more. You may need to give up some luxuries here and there, especially if they’re the cause of your fiscal trouble in the first place. Cancel subscriptions you haven’t utilized in a while, try meal planning rather than eating out multiple times per week, or buy generic groceries instead of the store brand.
Cut Extraneous Expenses
The goal here is to find which frivolous parts of your life can be sacrificed on the road to your new home. Before purchasing anything that isn’t a necessity, you could try asking yourself if you can afford to buy the item as well as putting its full value into a savings account. Do so if you can, and put the item back if not. Tricks like this can get you thinking about where all your money is going.
Handle Old Debt Carefully
When dealing with old debts, it is crucial to handle them with care, understanding that each state has its own statute of limitations, with the maximum period being 15 years. This means creditors have a limited time to take legal action to collect the debt. However, the clock on debt collection can reset under specific conditions, such as making a payment or acknowledging the debt in writing. Being aware of these nuances can help you manage your debt effectively and avoid unintended consequences.
Prioritize Large Debts While Reducing Them All
Once you’re bringing in more money than you’re sending out, it’s time to start chipping away at your debts. Depending on the sizes of your debts and their interest structures, it may not be feasible or effective to pay into the debts equally simultaneously. If this is the case, you may want to focus on the largest debts first, as those are the ones likely affecting your credit the most. Be sure that you’re paying into your principal debt, rather than your interest, whenever possible.
Consider Adding to Your Income with a Side Hustle
Starting a side hustle is a great way to earn extra income to save up for a down payment on a house. With more money coming in each month, you can accelerate your savings plan and reach your goal of becoming a homeowner much sooner. Whether it’s freelancing, tutoring, or pet-sitting, there are countless side hustle opportunities out there that can help you achieve financial stability and security.
Lower Your Barrier to Entry With Cheaper Homes
Lowering your standards about the home itself can also lower the cost. Accepting a home as-is and waiving protections such as inspections and escrow periods can sometimes convince a seller to knock a chunk off the asking price. Finding a home in severe disrepair and buying it cheap as a “fixer-upper” is great for handy hopeful homeowners, to say nothing of the greatly increased resale value if you ever move again.
Getting out of debt and into a new home is difficult enough to turn anyone off of the process, but organization and determination will go a long way in getting you into a house you can call your own. Use these tips to effectively escape debt and buy your dream home.
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