Three Ways to Overcome Consumer Debt Going Into Your First Home Purchase
Does consumer debt have you down about your hopes of buying your first home? When applying for a mortgage, your current expenses and debt will be considered before actually approving you for a mortgage. This is used to determine what you can afford and the level of risk that comes with lending to you. Having too much consumer debt during your pre-approval process can reduce the amount you qualify for, or in the worst case you may be declined for a mortgage entirely.
To tackle your consumer debt and bring it under control while also buying your first home, you need to know your options. As a leading mortgage broker and credit specialist, I have assisted several clients like you to invest in their first home and reduce their other debt by finding the right mortgage. To help you acquire the perfect mortgage solution, I have listed three ways to overcome consumer debt going into your first home purchase.
1. Use a cash-back mortgage
With this mortgage, you receive as much as 3% of your overall mortgage amount to pay off car loans, credit cards, lines of credit, or any debt that is keeping you from purchasing your first property. To learn more about how a cash-back mortgage could help you, click here to read our recent blog Peace Of Mind Mortgage For First Time Buyers.
2. Get a consolidation loan
When you have outstanding credit card debt or lines of credit debt, mortgage professionals are forced to use 3% of the current balance as your monthly payment in your mortgage pre-approval. This can drastically reduce what you are approved for. One of the best things you can do to make sure this debt doesn’t impact your pre-approval is to consolidate the debt under one roof in the form of a consolidation loan. This will provide simple, low monthly payments. Consequently, it will also make the payment more affordable for you to pay it down quicker and reduce the amount of interest you pay. Remember, credit cards usually have an interest rate of around 20% or more, so this is a great way to reduce your interest costs while creating a manageable repayment plan.
3. Prepare a budget plan
Put together a budget plan to see where you can save to reduce your debt. When you are looking to find ways to pay off your debt, the solution can typically be found in your credit or debit statements. Review your monthly purchases and see where you could be saving more. For example, a common occurrence we see when reviewing clients’ bank statements is regular coffee or tea purchases at expensive cafes. This can accumulate to hundreds of dollars a month just for having your morning coffee when this could be used to pay off your debt. Perhaps think about bringing a thermos to work or taking breaks from your favorite shops. Homeownership is an amazing goal to achieve, but it doesn’t come without sacrifice. And the best things to give up are unnecessary guilty pleasures, for the prospect of purchasing your first home sooner. So, set your priorities straight to achieve the bigger goal.
To determine which is the best solution for your situation, reach out to Cody Rowe today! I’m a credit specialist and mortgage broker in Victoria, BC, and I’m happy to help you overcome your outstanding debt issues. All you need to do is schedule a mortgage strategy session with me, and I will help you see how you can accomplish your goal of homeownership.
I work in association with Canada’s largest national mortgage brokerage Dominion Lending Centres. Through their assistance and resources, I can help you with all kinds of financial struggles. I excel in creating and implementing long-term strategies for clients in achieving their real estate goals. Moreover, with access to a vast network of major banks, credit unions, trust companies, and alternative lending options, I can ensure the correct solution for unique situations.