How To Avoid Accruing More Debt Before You Buy A Home

Debt is a necessary evil. On one hand, you need to have it to establish credit. On the other hand, having too much of it can make it difficult to buy a home.

When you have too much debt, it can be hard to buy a home. Your mortgage lender will look at your debt-to-income ratio when they pre-approve you. If you have too much debt, you may be turned down altogether or may find that you cannot afford as much as you want.

In this post, we’ll look at how to avoid accruing more debt before you buy your first Knoxville home.

Avoid Impulse Buys

Avoiding impulse buys is hard. Particularly in this day and age, where you can order just about anything on Amazon and have it delivered to your doorstep two days later. It’s those late night impulse buys that an wrack up debt and make it hard to buy a home.

In order to avoid impulse buys, be sure to consider the following before making a purchase on a whim:

    • Do I need this item?
    • Is this item within my budget?
    • Do I have the cash on hand to pay for it?
    • Can this purchase wait?

If the answer to those questions isn’t a deafening yes across the board, you may want to reconsider you purchase. Impulse buys are an easy way to wrack up debt, so when you thinking about buying a home avoid them at all costs. At the very most, be sure to sleep on a purchase before you press that button to buy the item.

Pay Cash

When you’ve become used to putting everything on a credit card, it can be a foreign concept to pay cash. Many first time buyers will charge it on a credit card or take out a new credit card and think about paying it off later. When you’re thinking about buying a home, this isn’t the best idea. Additional items taken out as debt will count against you.

Do you have that big ticket item that you absolutely must buy? Instead of buying it right away, save up the cash to pay for it. In just a few months of saving, you’ll be able to buy it sooner than you may think. It will also feel good to buy the big ticket item debt free.

There are many credit cards out there with great rewards. This is not to say that you shouldn’t put those on your credit card. But if you do, be sure to pay them off right away with the cash you have. That way you get the rewards and avoid having the debt.

Don’t Spend What You Don’t Have

Spending what you don’t have is one of the easiest ways to accumulate unnecessary debt. Unfortunately, it’s all to easy for many people to do. When you have a large credit limit it can be very easy to make an impulse buy and thinking about it later.

The simple way to avoid wracking up debt in this fashion is to avoid spending what you don’t have. If you don’t have the cash on hand to make a purchase, then don’t buy whatever item you’re thinking about buying. When you think about purchases in this fashion, it make life much easier. You won’t wrack up any additional debt when you’ve got the cash to pay for it.

Leave Your Credit Cards At Home

It’s easy to use credit cards without thinking about it.  When a credit card is just sitting in your wallet, it’s very easy to swipe it and make a large purchase without really thinking about it.

Instead of making it so easy for yourself to utilize your credit cards, consider leaving them in a drawer at home. Or, at least consider leaving most of them at home, particularly store credit cards. When you really have to think about using your credit card, you’ll think purchases more. Very much so the concept out of sight out of mind.

Make it harder for yourself to make those large purchases. It may seem to simple, but it really does work.

Don’t Forget To Pay Down What You Already Owe

Finally, while trying not to accrue any more debt is important. It’s also important to pay down the debt that you already have. Whether it’s student loans, a car payment or credit card debt, the more you’re able to pay down before you buy a house, the easier it will be.

It can seem overwhelming to pay down debt. But, it’s something that you do a little bit a time. Here are a few ways to pay down debt:

  • Cut unnecessary items out of your budget (i.e. your morning coffee at Starbucks).
  • Put that additional income towards paying down your debt.
  • Make a goal of putting a certain amount each month towards paying down debt.
  • Pay down one debt at a time.

You don’t have to be debt free in order to buy a home. But, the more debt that your able to avoid the better. It will allow you to afford more and will make it easier.

Are you thinking about selling your Knoxville home this year? Please let us know if there is any way that Knoxville Home Team can assist you. Rick can be reached at 865-696-9002 or via email at [email protected]. Kati can be reached at [email protected].