Planning to buy a home when you’re in debt – Is this a feasible idea?

Are you planning to buy a house of your own? If answered yes, you have to go through a nerve-wracking experience as the entire process is not a simple one. Buying a house is a huge investment as the money involved is also a large amount. You need to be watchful before taking the ultimate plunge as there are many small details that can lead you to a mess. Did you incur a huge amount of unsecured debt on all your credit cards and your student loans? If answered yes, you have to think twice about taking the plunge as a homeowner. Taking out a home loan with unsecured debt is a huge risk. Here are some points that you should take into account while taking out a home loan despite owning a huge amount of unsecured debt.

Can you afford a home loan after making the high interest debt payments?

Calculating your mortgage loan affordability is the most important factor when it comes to being a homeowner. Unless you calculate your affordability, you’ll never know what amount of loan you can afford according to your budget. Apart from this, if you already owe debt on your credit cards, can you afford to repay the secured loan on time? As your home is pledged as collateral, you have to be sure that you don’t miss the payments lest you lose your home to a forced foreclosure. Therefore, considering your mortgage loan affordability before taking the loan out should be the first job of a prospective homeowner.

Can you afford to pay down the required amount after paying your credit card debt?

You must be aware of the fact that you have to pay down at least 20% of the loan amount as down payment so as to lower the interest rates on the loan. But if you have enough credit card debt, will you be able to manage paying down the required amount as the down payment? You should think twice before taking this decision as you may be subject to PMI or Private Mortgage Insurance that can unnecessarily increase your monthly payments. PMI only benefits the lender and not the borrower. Therefore, consider your choices about repaying your credit card debt or taking out a home mortgage loan so that you don’t fall in a mess in the long run.

Can you maintain your home loan payments while repaying your credit card debt?

When you’ve taken out a home mortgage loan, you have to maintain the payments throughout the term of the loan so that you don’t lose your home to a forced foreclosure. However, if you have too much credit card debt and if you don’t change the financial habits that have lead to debt, you may dig deeper into the financial mess. Therefore ask yourself whether you can manage to change your financial habits so that you can save enough money for making the monthly payments on your home mortgage loan.

Whenever you ask any financial expert about the possibilities of taking out a mortgage loan despite having credit card debt, they will advise you against it. You just have to make sure that you repay the debt so that you can lower the DTI ratio and improve your credit score before grabbing the loan. This way you can secure a mortgage loan at an affordable rate and save enough money while repaying the loan throughout the repayment term of the loan.

About the author : Ryan is a contributory writer associated with the and has written several articles for various financial websites. He holds his expertise in the Debt industry and has made significant contribution through his various articles.