Millions of Americans make costly mistakes that leave them struggling with mounting debt. Smart planning keeps you from joining the number of people drowning in debt.
A staggering 74 million Americans have their lives turned upside down by mounting credit card debts. The piling mortgages make it difficult for them to establish an emergency fund, leaving them in a precarious financial state. Most people tend to run up high credit card bills because they aren’t in control of their finances.
Getting a mortgage pre-qualification in Texas is the simplest way to keep you from adding to this number. It ensures that you start your homeownership on the right note.
Stick to your lanes
First-time home buyers often make the mistake of buying a home that way above their budget, and this sets them down the road to financial ruin. You can’t blame them for swooning over the beautiful homes on the market. Getting prequalified for a loan gives you several advantages.
You get to know the amount of money a lender is willing to front you when buying a home. The amount should work as a guideline to help you narrow your search for a home. It keeps you from committing to a house that will tax your finances to the limits.
Additionally, you can use that figure to create a home-buying budget. With the help of the numerous mortgage calculators, you can calculate the monthly payments. You can then reconcile your budget and establish whether you can afford to spare that amount of money for the duration of the loan.
Safeguard your cash flow
Experts recommend that you don’t spend more than a third of your monthly paycheck on mortgage income. More so, when you’re carrying additional debts such as student loans and credit card bills. Committing more than 30 percent of your income to a home loan leaves you cost-burdened.
It means that you will struggle to meet your other financial liabilities, including paying your credit card and student loans. Credit cards are particularly tricky since they carry a double-digit interest rate yearly. Failing to make the minimum payments on the cards carries hefty penalties that increase your debt.
Taking a mortgage that fits within your financial capabilities leaves you in a position to pay your bills in full. It also enables you to make the minimum payments on each credit card to avoid the penalties.
Limit your credit card use
When backed to a corner, most people put most of their bills on the credit cards, a move that only leads to a financial limbo. Ideally, you shouldn’t carry a credit card balance that is more than 30 percent of the credit limit. Any more than that increases the risk of penalty interest and over-the-limit fees that set in when you exceed your limit.
Racking up a high balance on the cards lowers your ability to make the minimum payouts. In such a situation, you have to decide which cards to pay off and ignore some. Unfortunately, ignoring a credit card payment comes with hefty consequences, including the disastrous charge off.
A significant percentage of the American public is struggling under the weight of a mounting pile of debt. Credit cards make up the bulk of these debts, followed closely by home loans. Sticking to your lanes when taking out a mortgage keeps you from joining this group of people.