Purchasing a home is undoubtedly one of the biggest commitments. It is important to save money for down payments and you also require money for emergencies and repairs. You need to ensure that all the finances are in proper order so that you do not face any problem when you are thinking of getting a mortgage. It has been observed that most of the adults prefer bouncing from one financial quest to another.
Everyone requires money purchasing a car, buying a home and also, financing education. This means that people have to keep taking loans constantly. However, if you have taken any wrong step, it is obvious that you are not going to qualify for mortgages. Apart from that, if you are buried in debt of any kind, you must get cleared before you are moving forward.
Consolidating The Credit Card Debts Before Getting Mortgage Approval
You need to know that the debt of your credit card, as well as the approval for your mortgage, is known to go hand in hand. Most of the lenders are interested in knowing the total amount that you are capable of paying so that you can clear the loan that they are offering to you. This is why they are interested in knowing about the amount that you already owe to others. All the lenders are different and they will be interested in looking at the total money that you are earning every month along with the money that you will pay for your new home as well as various other obligations.
Even when your credit score is great, high debt payments on your credit card can make it extremely difficult for you to pay the mortgage. Credit cards are responsible for coming up with high rates of interest and in case if you are not clearing your balance during the payment cycle, it is obvious that the interest rate can keep compounding.
You can take out personal loans for consolidating the credit cards for breaking this unwanted debt cycle. According to www.forbes.com, borrowers use personal loans for consolidating their debts. The rate of interest is going to be lower in comparison to credit cards. Also, a personal loan is responsible for offering fixed rates of interest. Personal loans are of two kinds, secured and unsecured.
What About Secured Loan?
In case of a secured loan, you can use your property as collateral, which means that if you are defaulting on your loan, the lender will start owning the property. The perfect example of secured loans is home loans. If you have a home already along with equity, you have the option of borrowing money against the equity in the house. You also have the option of refinancing the home with cash-out refinance where the total mortgage amount is a lot higher in comparison to the existing loan. In this situation, you can convert the home equity into cash and use it for clearing your loans.
In the case of unsecured personal loans, lenders are going to consider the credit score and determine whether or not they will give you the loan. You may be interested in applying with numerous lenders and understand the best rate of interest given. Taking out personal loans for consolidating your debt can lower the credit score.
Using Personal Loans For Consolidating Debt
Debt consolidation is all about combining the credit card cash into a single bill, that is manageable because of a single due date. This means that you do not have to worry anymore regarding the multiple due dates and the multiple rates of interest.
You can also qualify for low rates of interest. You can also accept higher rates on cards when you were thinking of building your credit but unfortunately, it might have never got adjusted. If your credit score is good, your job history is consistent, and you have a solid income, you can bring the rate of interest down with the personal loans.
When you have a low rate of interest and a single bill to think about, you can start pulling yourself up and stay on top of all your unwanted debts. If the balance of your credit card has already reached the credit limit, it can affect the score negatively. Credit utilization is one of the major factors, which helps in determining the credit score.
What Is Credit Utilization?
Credit utilization is considered to be the comparison between the total credit that is available to you and the credit that you are making use of. If the credit utilization is extremely high, lenders can consider you to be a risk.
You need to have an extremely firm foot when you are dealing with debt. It is obvious that you are interested in getting ready for your home loan and to clear your debt, you can take certain important moves, like spending less money and saving a lot more. If you can reduce the monthly payments for your debts with the help of consolidation loans, you can use the extra money for the down payment that is required for purchasing a new home.
Using personal loans for lowering the total amount that you have to repay every month can also help in improving the statistics lenders keep leaning on, which is the debt to income ratio. To gain more information regarding this, you can visit NationaldebtRelief.com.
Other options that will help you to knock down debt
If you think that you already have the discipline as well as resources for knocking down the credit card balances within 6 months, you will not have to bother with loans anymore. You can also use balance transfer cards. However, ensure that you are using the balance transfer cards only if you can concentrate on clearing the amount and you can resist the desire of spending more money.
Deciding to consolidate your debts before you purchase your home is one of the wisest steps that you can take. If everything goes as you are planning, you will be ready to purchase your home within no time.