Debt includes all the money you owe. It can be credit card debt, student loans, mortgages, medical bills and car loans. Most Americans will carry some amount of debt, but sometimes the debt can get to be overwhelming. Learn here how to manage your debt and personal finances.
Credit card debt can hurt your chances of closing on a home even if you have already been approved for a mortgage. What many borrowers don't realize is that the lender may take another financial snapshot of their lives just before the closing. The second pull of your credit history and credit score could come any time within a week or two of your scheduled closing date. Keep your debt-to-income level the same as it was at the time the loan was approved.
Real Estate Minute with Ilyce Glink Boomers Have Never Met a Debt They Didn’t Like and That’s A Problem When it Comes Time To Retire Original Air Date: October 6, 2006
Real Estate Minute with Ilyce Glink Taking Longer to Pay Off Your Debts Isn’t Always the Best Solution Original Air Date: September 2006
When you're paycheck isn't enough to live on or you find you need money you don't have you may decide to get a payday loan. But are payday loans a good idea? When you take out a payday loan you're usually getting an advance on your paycheck and you'll increase your debt. Payday loans often end in exorbitant interest payments and bankruptcy court because debtors cannot repay the debt.
The best way to decide which loans to pay off first and reduce debt is to look at the interest rates. Student loans usually have lower interest rates than car loans and are partially tax-deductible. If you have extra money at the end of each month, pay off the highest interest loans first and pay as much into your retirement accounts as you possibly can.
Any time you take out a loan, whether it is personal, credit card, school, auto, or a mortgage, it lowers the total amount you can borrow to buy real estate in the future. Mortgage lenders take a look at your monthly debt service and subtract that number from the total amount you have available to pay your total debt service.
What most folks don't understand about credit these days is that almost no one is turned down. Although your credit score may not be the highest, it may be good enough to get a line of credit or a home equity loan at a fairly decent rate. If you can refinance your mortgage and take out some of the equity that you have, you may be able to do some of the repairs and improvements you need to do to continue living there.
A homeowner and business owner has a low credit score and extremely high credit card debt but wants to refinance an investment property. Having high debt and a low credit score is a bad combination to try to get a mortgage. A high interest rate will be the likely result of trying to refinance with the low score and high debt.
When creating a budget it is important to understand what percentage of your income should be going to you housing costs. The 28/36 debt to income ratio is commonly used by home lenders. Lenders will allow you to spend up to 28 percent of your gross monthly income on your mortgage, real estate taxes, and homeowners' insurance premium. The 36 number refers to total debt.