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Debt Pay Off Before a Home Purchase

Updated: Jul 3, 2023

I often get questions from buyers about how to pay off debts before a home purchase. Here are my top tips, in order of importance.

Disclosure: I'm Not a CPA or CFP

General advice:

Keep up with minimum payments across all accounts.

Establish a budget & stick to it if you don't already have one that you stick to.

Get educated on credit.

If possible, increase your income.

Get educated on taxes.

Don't neglect warranties & insurance.

Don't establish new "bad debt."

Keep separate designated accounts for major fixed expenses w/ no monthly fees or transfer fees incurred.

Avenues to consider to pay off debt:

Seek a specialist or group that specializes for direct assistance.

Consider the debt snowball.

Consider a debt consolidation loan.

If you have a VA loan, consider having the seller help.

Consider 1 or a few credit cards with a 0% APR, but mind the risk of these if you don't have at least 6 months of proven budgeting/savings growth track record.

If you already own a home, consider a home equity line of credit (HELOC).

Avenues to consider when purchasing:

Use a loan with no down payment & possibly no or limited closing costs.

Consider down payment assistance or another program to reduce home costs such as help with closing costs

Consider tapping a retirement account, but some are better than others.

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