If your finances are, or were, wrecked and you’re basically starting from scratch, what do you do? Besides any current mortgage, unless you’re behind on payments, the next major expense for most people might be student loans. If your income isn’t substantial and a lot of your income goes to them, they could impact your ability to obtain a loan; especially if you also have any car payments. In fact, you probably won’t qualify without a good income netting over $100k if not a bit more if you have one or both of these expenses for the next year.

To start, you’re going to need the right kinds of accounts. You need an HYSA and to get those student loans refinanced or the interest rate negotiated. You need to pay them down a bit more and see if you can get your payments lowered which helps your DTI and loan chances. If you don’t have them, the next thing is car payments.

Even one car loan is absolutely high cost nowadays and can destroy how much you can afford and be approved for on a home. Unless your income is good and in the six figures with these current rates still high, your payments need to be made until you have 10 payments left so they don’t affect your approval. If you have two car payments, you need to pay one off ASAP. So many of my clients get approved for such a low amount, if at all, because they both have car payments and their income can’t overcome the interest rates on home loans as well. It’s just too much for the average person to afford them all.

Get a savings plan in place even if you have none of these but can’t seem to save enough money. If you need to pay down one or more of these, then the savings plan will be for that. It’s different and requires you to pay at least an extra $50 towards one or more each month. The last expense is credit cards. Stop charging up debt and get those paid down! If more than 30% of your total credit limit is charged at any given time, you’re spending too much. Stop. 10% is even better. Even paying off your credit card in full, you’re charging more than 30% of your total credit limit, that is wreaking havoc on your credit score and DTI from a lender perspective. Credit Karma is not what lenders use and being a charging queen on those cards is not good for a home loan. It’s not just the balance we look at but HOW MUCH YOU SPEND IN TOTAL on those cards. It matters.

Now start saving and paying things off! Follow my debt pay down plan and savings plans to get in the right financial position to not be in debt anymore and actually have money in the bank. For a copy of my new and updated Standard Savings Plan email jenniferlarsonent@yahoo.com for the free booklet and program.