4 Steps to Reducing Debt for Future Homeowners

By: Amy Collett

Buying a home is a big dream for many, but making homeownership a reality may seem impossible if you’re carrying debt. That isn’t the case, though. By following these steps courtesy of the Shinabarger Team, you can reduce your debt and be closer to getting the loan and home you desire.


  1. Write Down Debts

It’s impossible to know how to tackle your debt if you aren’t fully aware of all the debt you are carrying. Make a list of every loan and obligation you have so you can start paying these off and ultimately get approved for a home loan with a lower interest rate.

While you are listing your debt obligation, make sure to note both the amount you owe and the rate at which you are expected to pay it. Rates can vary widely, and they will be important in choosing what debts to pay off first.

  1. Make a Budget

Now is not the time for extraneous spending. If you are planning on purchasing a home in the next year, buckle down now and make a budget you can stick to that prioritizes eliminating debt.

Add up all the bills you must pay each month and deduct them from the income you bring in. Include credit card payments and expenses like groceries and gas, as well. Whatever you have leftover that you might ordinarily put toward eating out or personal purchases can instead be used to pay off your debts.

  1. Pay Off Debt Wisely

There is a lot of debate about what is the best way to pay off debt. Some prefer the snowball method, while others favor the avalanche method. Ultimately, both ways are effective, so choose what is best for you.

You want to be able to pay debts efficiently in the shortest possible period of time. If you need to, you can start by paying off smaller debts so you can manage to eliminate them entirely.

  1. Research Mortgage Rate Options

There are different ways to reduce your mortgage rate, but the best option for you will depend on your finances, credit history, and plans for the home you’re purchasing.

Federal Housing Administration or (FHA) loans allow you to get a lower rate and pay a smaller down payment, though you will be required to pay mortgage insurance. Although this means more money out of your pocket each month, you can choose to refinance your loan later down the line.

Another way to reduce your mortgage rate is to pay mortgage points. Mortgage points let you buy percentages or even fractions of percentages of your loan rate back. By spending money on mortgage points at closing, you can reduce the amount that you owe each month. Whether this is the best option for you depends on a number of things, including how long you plan to live in your new home. Use a mortgage points calculator to assess if mortgage points are the right path for you.

Don’t be overwhelmed by your debt. Work effectively to pay it off and apply for a home loan when it makes sense. The effort you make preparing will pay off big long-term when you get into the home you desire at a more affordable rate. Contact the Shinabarger Team for a list of approved lenders.

Interested in purchasing a home in the Tri Cities area? Partner with the dedicated real estate professionals at the Shinabarger Team!


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