Does debt settlement affect buying a house?

Does debt settlement affect buying a house? You don’t have to worry if that question has been on your mind lately. Yes, your debt settlement will be on your credit record and history in the next seven years, but it will not stop you from buying a house. You must prove to your mortgage officer that you can pay your monthly obligations and are good to go.

It might not be wise to apply for a debt settlement and buy a house immediately, as lenders may not want to work with you yet. You must understand that lenders will see you as a significant financial risk. So what do you do? Save right after your debt settlement approval. It may take some time, but you need to discipline yourself financially by saving money for your down payment.

Here’s what you can do while waiting for your dream house to become a reality:

• Save as much downpayment as you can. A larger down payment is critical if you want to own your home. This is especially true if you have applied for a debt settlement in a recent couple of years. A more significant downpayment will lessen the worries of your lender about your ability to pay them back, improving your chances of getting a mortgage approval. The better if you can make it a goal to save as much as 20% downpayment.
• Cancel every dispensable spending. Stop justifying your unnecessary expenses. You don’t need to head to the nearest popular cafe chain to get your macchiato or cappuccino, right? You may argue that it is only $4.75 a cup, but for 365 days, that cup of designer coffee will set you back $1,733.75! You can set aside a significant amount for debt repayment or saving for your house.

• Aim for an improved credit score.  The higher your credit score, the lower your interest rates will be. Pay off as much debt as possible to improve your score and debt-to-income ratio simultaneously. When lenders look at your credit score and your credit utilization, they need to see that you pay your debts on time and don’t max out your credit cards all the time.

Does debt settlement affect buying a house? It may, but it doesn’t have to if you start doing something about improving your financial health.