buying a home in debt

8 Steps to Buying a Home in the Next Year (Even If You’re In Debt)

Most people wait until they’re out of debt (or at least close to it) before buying a home. That’s because it’s a lot easier — to get a favorable mortgage loan, pay a decent down payment, and ensure that you remain in solid financial standing after you purchase the house.

But that’s not the only way to do things. While it’s more difficult, you can still buy a house when you’re in the midst of conquering debt, and you can even do it in the next six to 12 months.

From hiring a good real estate agent to establishing a debt management plan to choosing the right price range, here are eight tips for purchasing a house when you’re in debt, presented below by Under 30 Wealth.

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1. Make Sure It’s Right for You

The first step is to ensure that buying a new house is the right move for you.

Conventional wisdom says that you should probably hold off if you don’t have a stable income, your potential mortgage would be more than 33% of your total income, or you have a debt-to-income ratio higher than 40%.

Also, if you can’t afford a down payment, you should consider waiting so you’re not stuck with high-interest rates, among other things.

2. Explore Different Loans

While paying at least 20% down on a house is ideal, you may still be able to land a mortgage without it. Do some research on the various loans available to determine whether you could qualify, such as FHA loans, VA loans, and Rural Housing loans.


3. Hire an Experienced Agent

No matter what your financial situation, working with a qualified real estate agent can improve your prospects and make the entire home-buying process go more smoothly.

Although it’s always a good idea to get a feel for the Miami housing market using sites like Redfin, a realtor can help you find the perfect home and navigate each step of the home-buying process.

4. Put a Debt Management Plan in Place

Your debt isn’t going to magically disappear. You must be proactive in tackling your debt each day, especially when you’re hoping to buy a home within the next year.

Consider working with a debt management professional who can help you devise and accomplish a plan for getting your debt under control.

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5. Stop Accruing Debt

Debt can quickly get out of control, and the most practical way to begin managing your debt is to stop adding to it. Stop using your credit cards, opting for cash purchases instead.

You might be surprised by how quickly your credit score can improve by paying off your credit cards instead of using them.

6. Establish a Strict Budget

Today is the day to sit down and create a budget that will help you accomplish your goal of a home purchase. Do an audit of all your bills, and develop a budget that leaves you a surplus at the end of each month. Note that you will need to rework your budget after you buy a home.

7. Save for a Big Down Payment

The bigger the down payment you can make, the better your chances of landing a loan that works in your favor — and the less you’ll have to pay on your house in the long term.

Even if you can’t save up 20% of the purchase price on your new home, start putting aside as much money as possible.

8. Purchase Under Your Price Range

Finally, buy a house that falls under your estimated affordability rate. Even if you’re approved for a large loan amount, you must think about your future.

Do you really want to risk being stuck with a mortgage that you can’t pay off month-to-month? Be frugal with the loan you accept so that you can put yourself and your family in a better position long-term.

If you’re in debt and you want to buy a home within the next year, it’s possible: It will just require you to work a little harder toward your goal. Along with following the tips listed here, keep researching to figure out any other steps you need to take.

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