Credit cards are useful tools for building credit and spending money you may not have at the moment. However, their convenience accompanied by financial hardship can make it easy to rack up significant credit card debt that may be challenging to pay off quickly. This debt may have an impact on your ability to buy a house.
Buying a house is a massive milestone for many people, and it takes a lot of planning, research, and money. Applying for a home loan is a fundamental step in the home buying process. Your ability to obtain a loan is typically affected by your creditworthiness and any existing debt. If you’re worried about your existing credit card debt preventing you from buying a house, consider discussing your debt situation with an experienced debt settlement lawyer.
How Does Buying a House Work?
Buying a house is a long and expensive process that requires a lot of planning and forethought. Before buying a house, you must first consider what you can afford. People rarely have enough money on hand to purchase a house outright. Instead, they save up for a down payment and obtain the rest by applying for a mortgage loan.
As with any loan, a critical factor determining whether you will be approved for a mortgage is your creditworthiness. Before applying for a mortgage, check your credit score to see whether it is in a good enough range to get the loan amount you require at a reasonable interest rate.
Your Credit Card Debt Can Impact Your Credit Score
Having a high credit score improves your mortgage application approval odds. A good credit score is also the best way to earn a lower mortgage interest rate. Existing debt can drag down your credit score if not appropriately managed, reducing your loan approval odds.
Having a significant amount of credit card debt likely means your credit score is not the best possible for securing a suitable mortgage. If that is the case, it may be wise to delay buying a home until you can pay down your debt and improve your score. Once your score is in a good range, you can begin looking for the type of mortgage that best suits you and your homeownership goals.
Credit Card Debt Can Affect Your Home-Buying Power
Although having a good credit score is a crucial aspect of the home-buying process, it is still possible to buy a house with credit card debt. Even with significant credit card debt, you still might be able to secure a mortgage. However, you might not get the best rate or be approved for the amount you want.
Ultimately, significant credit card debt reduces your home buying power. To determine your home-buying power, you must compare your income to your current debts and expenses. Lenders typically look at your debt to income ratio to determine If you will be a reliable borrower and see how much additional debt you can take on without being financially overwhelmed. Having a low debt-to-income ratio makes you look more appealing in the eyes of lenders, so you will be more likely to get your desired rate and loan amount.
Consult a Debt Settlement Attorney to Begin Increasing Your Home-Buying Power
Buying a home is an important milestone for many people and an impressive financial investment. Don’t let credit card debt hold you back from building the future you want. Work with an experienced debt settlement lawyer to determine the best strategy for reducing what you owe, improving your credit, and increasing your ability to buy the home you want.
McCarthy Law is composed of highly skilled legal professionals experienced in debt negotiations. We know how stressful it can be dealing with the financial burden of significant credit card debt and have helped numerous clients explore their options for lowering the amount of their debt. To schedule a consultation with our firm, call us at (855) 976-5777 or complete the contact form on our website.
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- Does Credit Card Debt Prevent You From Buying a House? - May 11, 2022