What Is Debt Settlement and How Can It Help You Buy a Home?
Debt settlement involves working with a company to negotiate down and pay off your unsecured debts like credit cards, medical bills, repossessed cars and personal loans for less than the total balances. It works as liaison between you and creditor so it can take harassment away from you. The debt settlement company contacts your creditors to try to get them to accept a payoff that is smaller than what you originally owed.
How Soon Can You Buy a House After Debt Settlement?
Tips for Qualifying for a Mortgage After Debt Settlement
Here are some tips to ensure debt settlement smooths the path for you to buy your dream home:
- Pay all debts on time – A timely payment history is crucial after settling debts. Don’t miss any payments!
- Keep credit card balances low – Get revolving utilization below 30%, or even lower if possible.
- Hold off on new credit – Too many new accounts can raise red flags with lenders. However, if you have little credit it can also hinder you from getting a higher credit score. So get one or two secured credit cards to help reestablish your credit.
- Save for a down payment – Lenders want to see savings set aside for a down payment. However, once you get debt under control, many state attorneys offer excellent down payment assistance programs. These programs provide grants for down payments, making homeownership more accessible without large savings. With assistance, you may not need as big of a down payment as you think.
- Consider using a co-signer – Adding a co-signer with good credit can help approval odds.
- Compare multiple lender quotes – Shop around and find a lender comfortable with your specifics.
As long as you have a plan to purchase a home, debt settlement can assist you in achieving your goal. You can feel confident putting the past behind you and taking steps toward owning your perfect home sooner than you may have thought!