Over 47% of Americans carry credit card debt from month to month, and many can’t handle their overall debt load. That’s why so many turn to a debt settlement company for help. Settling debt for less than you owe can bring a sense of relief — you finally got rid of that overwhelming debt! However, the process of falling behind and being in default can make you wonder if you’ll ever get back on track. The good news is that you can! You can even buy a home once you’re debt-free. How long should you wait before starting the buying process?
Let’s take a look.
The Overall Impact of Debt Settlement
Debt settlement can have a negative impact on your credit score, but not because you settled the issue. Instead, it’s because of the initial delinquency on the accounts.
Settling debt doesn’t remove a delinquency or default. However, it does give you a clean slate to start new.
Having less debt to your name can help you get back on your feet and save for a down payment for your new home. You can also take steps to rebuild your credit score while you wait for the negative marks to age so they don’t keep you from buying a house.
Work on Improving Your Credit
Exactly how long you need to wait to get a mortgage and buy a home will depend on two factors: how quickly your credit score rebounds and how long it takes you to save a down payment.
First, make sure you work on rebuilding your credit score. If necessary, use a secured credit card to build a history of paying on time each month. You can use the card for small purchases and pay it off in full each month.
Keep to a budget and make sure you don’t start building up more debt once you’ve finally gotten free from it. You might decide to create an envelope system for different parts of your budget or buy only in cash.
Getting back on track will help you afford a home and avoid future financial problems.
Find the Right Mortgage
How long will it take to qualify for a mortgage and save a down payment? It depends a lot on the mortgage you decide to get.
An FHA mortgage is available for borrowers who have as low as a 580 FICO score. You can also save up as little as 3.5% for a down payment, compared to the usual 20%.
As you can see, when you look for the right mortgage, you can qualify to buy a home much sooner than you might expect.
Get Ready for the Buying Process Today
Getting your debt settled is a major step forward in the home buying process. Once your debt is managed, you’ll have a better debt-to-income ratio and can start rebuilding your credit score.
Saving for a down payment is much easier when you target the right kind of mortgage. With an FHA loan, you can pay as little a 3.5% down.
Are you ready to settle your debt and move forward with freedom? We’re here to help. Get started with our debt settlement program today!