Debt Management- Buying a house in 6- 12 months

Debt-Management: Buying a House in 6-12 Months

Getting a handle on your debt is essential if you want to successfully apply for a mortgage and purchase a house within the year. Even when you’re not carrying significant debt – or none at all – you may still need to build up your credit score first. Justin Stamper offers some essential debt-management advice if you’re looking to purchase a home in 6 to 12 months: 

Target a Debt-to-Income (DTI) ratio of 35 or less 

The lender will pay the most attention to two things when determining your suitability for a mortgage: your DTI and your credit score. Your debt-to-income ratio is the relationship between your income and outgoing debt. If the ratio is good, the mortgage lender is more likely to grant your loan. If it’s high, your application is likely to be declined. 

According to a Better report, a DTI of 36 percent or less is good, between 37 to 50 is moderate, and 51 and above is high. You can use an online calculator to figure yours out. If it’s more than it should be, you need to take steps to reduce it.  

Aim for a credit score of 580 at the bare minimum 

Your credit score is the measure of how responsibly you manage your debt. You need a solid credit score – 580 but more typically 620 – to qualify for most mortgages. Your credit score is calculated using your credit history, credit use, length of credit history, credit mix, and new credit. It’s always a good idea to shoot for a higher credit score – 700 if you can swing it. Not only does it increase your chances of qualifying for a loan, but it also determines how much you can borrow. 

Understand which debts are important to pay off first 

Before you begin to pay off your debts willy-nilly, it’s important to prioritize them. Some debts are better to pay off first. CNBC explains which debts to address first: Red zone debt with the highest interest rate, the most “damaging” kind to your credit score. The debt that comes under this category is typically credit card loans and personal loans. Longer-term, low-interest debt like auto loans, business loans, and student loans (most kinds) are okay to leave for later. 

Create a credit-building and debt-reduction plan 

You can build up your credit score, adding as much as 20 points per month, and reduce your DTI with a solid debt-reduction plan. Some suggestions from experts: Pay your bills on time, maintain a savings or checking account with a minimum balance, don’t write bad checks, acquire a low-balance credit card, pay off debt, avoid new debt, put off big purchases for later, and get rid of errors in your credit report. 

Save for the downpayment and other expenses

You are required to pay a percentage of the house price out of your own pocket even when you acquire a mortgage, which is referred to as the down payment. This is typically 2-5 percent of the house price but can go up to 20 percent (or more). Some other expenses you’ll have to cover are closing costs, moving fees, furniture expenses, remodeling costs, and fees for professionals. Having a rainy day fund may also be a good idea. 

You still have options if you don’t have 20 percent for a down payment 

If you don’t have 20 percent saved up for the down payment, you may be able to opt for special or government-backed mortgages. For example, you may qualify for an FHA loan, Rural Housing loan, or a VA loan to help you afford your new home. These loans have less stringent requirements, next to no money down, and more lenient repayment terms. 

Use professional services for help with debt reduction 

Financial advisors are your best bet when you’re unsure of how best to get your debt under control. They’re professional advisors who can assist you in coming up with a tailored debt-management plan. Optionally, if you’re unsure about when the statute of limitations on your debt will expire, you can contact a reputable attorney to avoid resetting the debt collection clock.  

Use professionals services for your upcoming real estate transaction 

Working with professionals – like your very own Justin Tamper – can help you find the best real estate deals in your desired neighborhood. You will have an easier time finding a suitable home, negotiating a good price with the owner, and closing. Other professionals – attorneys, loan underwriters, realtors – can also offer valuable services. 


Purchasing a home is a long-drawn-out process, as is a mortgage application. Research and get your ducks in a row as early as possible to avoid problems down the road. Keep in mind that you aren’t necessarily stuck with your mortgage when you pick one – refinancing is an option down the road.  

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