How to Lower Your Debt as You Prepare to Buy a House
The time has almost arrived for you to invest in your first home in Scottsdale. But you have some preparations to make first, and one of them is lowering your debt. This might feel overwhelming, but it can and should be done before you enter into your first mortgage. SC Financial Services invites you to read on for some tips to help you get your financial situation up to par before you buy a house.
Build a Budget
Your first step is to build a budget. Start by listing all your current income and expenses, and see where you stand. If you’re in the red, you should consider re-evaluating your expenses to put you in a better position to buy a house. Take a close look at how much you’re spending on miscellaneous expenses each month. You might be able to drop some streaming services, find a cheaper cell phone plan, or cut back on going out to eat. Even if you have a surplus, you might still consider making these changes to pay off debt and build your savings.
Also, it is important to understand the real estate market in your area. Research home prices so that you know what your savings goal should be for a down payment. For example, the median home sale price in Scottsdale is currently $765,000.
Pay Off Your Current Debt
Next, work toward paying off some of your debt. Make a list of what you owe, including the interest rate and balance. From there, come up with a plan to reduce your debt. This may include paying more than the minimum monthly requirement or making an extra payment after your quarterly bonus. Consider paying off the largest debt first, or, as Credit Karma suggests, use the snowball method, getting rid of the smallest debt and using that momentum to work through the rest. You could even consider debt consolidation, depending on your situation. Make a commitment to avoid further debt even if that means foregoing some purchases.
Improve Your Credit Score
As you prepare to purchase your house, work to improve your credit score to make it easier to get a mortgage. Paying your debts and bills on time, or even early, can help with this. Also, closely monitor your credit rating, dispute errors, and minimize applications for new lines of credit.
Balance Your Business
If you’re a business owner, make sure your business is steady and financially secure before you start house-hunting. Keep your business and personal incomes separate, too, and fight the temptation to take money from your business to fund your home purchase. You could also look at restructuring your business as a limited liability company (LLC), which may give you some tax advantages and limited financial liability with regard to your business. Be aware that states have varying regulations for LLCs, so do your research on forming an LLC in Arizona before you decide what to do.
Work Toward Your New Home!
It may take some time, but you can pay off your debt and reach your goal of homeownership in Arizona. Pay down your debt, bulk up your savings, improve your credit score, and make sure your business is on sound financial footing.
If you are ready to take control of your financial future, contact us to learn how we can develop a personal financial plan to reach your goals. We can be reached at (480) 214-9596 or info@scfinancialservices.com. Thank you!