Buying Your First Home: How to Get Out of Debt to Buy a House

Dan Barcelon
Dan Barcelon
Published on September 1, 2017
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What You Will Learn in This Article (Reading Time – 5 minutes):

  • How does debt impact your life and finances
  • How to reduce your expenses to get out of debt
  • Paying more than the minimum to lower your debt obligation
  • Using professional debt services to help you get out of debt

Buying a home may be at the top of your list of goals that you would like to accomplish soon. However, in order to accomplish this goal, you may first need to get out of debt. Debt can make it challenging to qualify for a home loan, and it may have a negative impact on your credit rating. More than that, when you are burdened with high monthly debt payments, you may not be able to manage the mortgage payment on a new house. By taking a few important steps, you can get out of debt faster and start looking for your home.

Understand the Impact of Debt

To get out of debt, you should understand the impact that it has on your life and finances. If you have not done so recently, spend a few minutes pulling together all of your credit card statements and loan statements. Add up all of the total monthly debt payments that you are responsible for. Then, add up the total interest charges for the last month. The interest charge is a cost associated with using loans and credit cards, and the interest charges and total monthly payments can be entirely eliminated from your budget when your debts are paid off. When you get out of debt, you may save hundreds of dollars or more each month because you no longer have to make debt payments. This amount of money can help you to afford to buy a new house , and it may also be used to improve your lifestyle, save for a rainy day, and more.

Remember that debt can play a major role in your credit rating. The amount of debt, the type of debt, and your payment history are all taken into account by the credit bureaus when determining your credit scores. When you find a way to get out of debt, you may be able to improve your credit rating. This could help you to potentially qualify for a better interest rate on a home loan.

Reduce Your Spending

To get out of debt quickly, you will need to make larger payments to your debtors than you are currently making. This means that you may need to reduce your expenses to free up extra cash. Some people will reduce extra spending, such as by not going out to eat at restaurants and skipping their usual cup of coffee on their way to work. These are some ways to reduce spending, but a better idea is to reduce the cost of recurring expenses. For example, you may move to a more affordable apartment, refinance your car loan or eliminate your cable TV programming. These permanent changes to your spending habits will help you free up more money that can be used for debt reduction on a regular or ongoing basis, and they typically will not result in an uncomfortable lifestyle change while you try to get out of debt.

Pay More Than the Minimum

Many people are able to free up at least a few hundred extra dollars per month in their budget by making these changes. This is extra money that can be used to directly reduce your outstanding debt balances. Consider starting with your account that has the lowest balance, and pay down the balance as much as possible each month until it is eliminated. Then, focus your attention on the debt with the next lowest balance. Continue with this strategy until all debts are paid off if you want to get out of debt in the most effective way possible. You may not need all of your credit card accounts open after paying them off, and some may charge you an annual fee even if you do not use them. Consider closing all but one of your credit cards after paying the balances off.

Avoid Taking on New Debts

When you want to get out of debt quickly so that you can buy a house, you should avoid taking on new debt. Many people use credit cards as a source of emergency savings when they are dealing with unexpected expenses. If you are in this habit, consider increasing your savings balance so that you have a nest egg that you can turn to when unexpected expenses crop up. Remember that using a credit card to pay for these expenses actually makes them more expensive overall. This is because credit card balances accrue interest each month. Some interest rates may be as high as 23 percent or more. When you use your savings account balance to pay for these expenses, you eliminate unnecessary interest charges.

Consider Seeking Professional Assistance

Many people want to get out of debt, and they struggle for years or even decades with their financial burdens. During this time, some people barely make a dent in their debt balances, and others may see their debt balances rise despite their best efforts to pay the balances off. If you are challenged by very high debt balances and are ready to get out of debt, you may consider seeking professional assistance. A debt service company, such as American Debt Enders, may be able to help you in numerous ways. For example, a debt service company may analyze your budget and make thoughtful recommendations regarding spending habits. In some cases, it simply takes an objective eye to find money-saving opportunities in your budget. You may also benefit from debt management programs. Through this type of program, the debt service company will manage all of your debt payments and may even negotiate reduced balances and payments with your creditors. This may help you to more easily and quickly get out of debt.

One thing that makes American Debt Enders unique in the world of debt relief is their Debt Dispute Program, which requires debt collectors to provide proof that a debt is 100% legal, collectible, valid, and verified. If the collectors cannot prove any of those things, they must cease their collection efforts. Definitely check them out as they offer free credit counseling advice for anyone in debt, and can tell you what options you have based on your situation. They also have a variety of other programs such as Private Student Loan Debt Settlement, and can even stop creditor harassment too.

Evergreen Properties and Investments can help you to achieve your dream of homeownership in the Long Beach area. Regardless of the stage you are currently in with your debt elimination effort, we can meet with you to discuss your plans and to help you to time your purchase strategically. An initial consultation with our team may motivate you to pay your debt balances off more quickly.

From the Author: My name is Dan Barcelon and I believe that Real Estate can be one of the most valuable assets you’ll ever own. I’m dedicated to educating and guiding my clients on how to manage and leverage their homes to create an Evergreen legacy for themselves and their family. I primarily consult both home buyers and home sellers on reaching their personal and financial goals through Real Estate in the following cities of Southern California: Long Beach,  Carson,  Cerritos,  Signal Hill,  Torrance,  Lakewood,  Cypress,  Downey,  Bellflower,  Norwalk,  Wilmington,  La Palma,  and Artesia.

If you’d like to discuss if buying, selling, or investing in real estate is right for you at this time, feel free to reach out. You can call/text me at 562-270-5812, or you can e-mail me at danb@EPIrealestate.biz.

Related Articles:

Bill Gassett – Financial Mistakes of First Time Home Buyers

Teresa Cowart – Simple Ways To Cut The Cost of Moving

Lynn Pineda – Warning Signs to Look For When Buying a Home

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Buying Your First Home: How to Get Out of Debt to Buy a House
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