How to Buy a House to Consolidate Debt
Owning your own home can be one of the most rewarding experiences of your life. Being debt free is something most Americans can only dream about. Imaging buying a home and paying off your credit cards, car loans, and student loans at the same time! If you want to experience the ultimate “fresh start,” then buy yourself a new house and consolidate your debt all in one fell swoop.
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Instructions
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How to Buy a House to Consolidate Debt
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Contact a mortgage broker. Find one that offers 105%, 107%, or 110% purchase loans. These loans will allow you to pay the full price of your new home, plus use the extra 5%, 7%, or 10% to payoff your debts. For example, if the house you want costs $200,000, and you get a 110% purchase loan, that loan will cover the cost of your new home and give you $20,000 to pay off your debts.
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Get pre-approved and get it in writing. Before you even start looking at homes, you need to find out how much house you can afford. Once you’ve found a loan that you qualify for, make sure to lock in the rate.
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Define your payoffs. Sit down with your loan officer and review your debts. Decide how much of the loan proceeds will go to pay off each of your debts.
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Find your home. Now that you know how much you can afford, start shopping. Once you’ve found your home and your offer has been accepted, call your loan officer.
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Schedule your closing and review your HUD. It is your responsibility to make sure all payoff amounts and payees are correct on your settlement statement. It is your loan officer’s responsibility to give you the documents at least 24 hours before you close on the loan. If something looks wrong, insist that it be changed before you sign anything.
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Tips & Warnings
You can try to get the loan from a bank, but mortgage brokers carry a much wider variety of loan products.
Never borrow more than you need. Don’t get a 110% loan if you only need a 105% loan to cover all your debts.
Don’t settle for getting pre-qualified. That means nothing. Get pre-approved and lock your rate for at least 30 days.
After you lock your rate, do not do anything to change your credit report. Don’t get any new credit, don’t miss any payments, and don’t lose your job. All of these things may disqualify you.
