Strategies for Reducing Your Debt and Saving for a New Home
Debt can be a major barrier to buying a new home, but there are ways to manage your debt while preparing for a home purchase. Paying off debt can be challenging, especially for those who are on a fixed income. Think about ways you can cut back on expenses, and be sure to connect with a trusted realtor from North Texas Top Team as you search for a new home.
Know (and own) your debt
For people who have large debts, it may seem easier to avoid thinking about how much you actually owe. While this may relieve stress in the short term, it won’t help you with big goals such as purchasing a new home. Instead, dig into your finances to wrap your head around each line of credit or loan in your name so you can make a plan for paying it off. It may be beneficial to work with an experienced financial consultant who can help you create a budget and get your debt under control.
It’s vital to pay your bills each month: not only will it help pay down what you owe, but it will also keep you in good standing for future credit inquiries and improve your credit score. At the very least, pay the minimum amount due, but keep in mind that if your interest rates are high, you won’t be able to pay off your debt very quickly. Decide which debts you should pay off first, typically focusing on the debts with the highest interest rates. Rank your debts and determine what you can reasonably pay to eliminate those and save money on interest in the long term. Get savvy with goal setting, and write down your plans for paying off your debts, one credit card or loan at a time. Remember that you can still buy a house when you have bad credit, but it will make the process more challenging. If you have a low credit score, for example, this can make it difficult to secure a loan since lenders view you as a high risk. So, it’s important to make sure you have your credit in good standing before you decide to purchase a home.
Create a budget
Once you’re an expert on your debt situation, it’s time to budget. Budgeting is a great tool for saving money and can allow you to realistically plan what you can afford to spend money on each month. If you’ve struggled with budgeting in the past, consider using a budgeting app to help you get started again. If you’re gearing up to buy a new house, consider some guidelines to help you save. First off, determine what you can afford for a down payment. While 20 percent can help you avoid mortgage insurance, it’s possible to put down as little as three percent when buying a new home.
Decide what you can realistically pay for your new monthly mortgage payments. A good rule of thumb is no more than 25 percent of your income; any more than that, and you won’t be able to save money for emergencies. When you figure out your ideal monthly payment amount and what you can afford for a down payment, you can do the math to determine the price range you should be looking at for a new home.
Prepare to sell your current home
As you begin to think about buying a new home, be sure to consider how to prepare your current home for sale. This will include necessary updates and repairs, such as painting rooms in neutral hues, realigning drawers, fixing cracks in the ceiling, and refinishing wood flooring. Curb appeal should also be kept in mind, with everything from a newly-painted mailbox to sprucing up the landscape to trimming bushes and shrubs. You can also boost curb appeal by hiring a tree service to pull out any dying trees or trees that are too close to your home. Remember to also think about staging for the interior. Remove large furniture, put away keepsakes and photos and open the space to make it more welcoming to buyers.
Getting ready to buy a new home is a big undertaking, so be sure to get your finances in order by assessing your debt and making a plan for paying it off. Start budgeting to help you save money for a down payment, and determine what you can reasonably afford for your mortgage payments. Lastly, don’t forget to prep your current home for sale, which will include making repairs and cleaning up your landscaping. Before too long, you’ll be well on your way to buying a new home to enjoy in retirement.
Are you thinking about buying a home in North Texas? The North Texas Top Team can help
you find the new home of your dreams! Call (469) 759-3899 today to make an appointment!