Buying a House Soon? Here's How to Get Your Debt Together Before You Apply

Let's get one thing out of the way. If you're planning to buy a home within the next year, your debt will come up. A lot. Mortgage lenders will comb through every corner of your finances, and anything messy could cause delays, higher interest rates, or worse – a flat-out denial. That said, this isn't about being perfect. It's about showing you're paying attention and heading in the right direction. And the good news? With 6-12 months of lead time, you've got breathing room. Enough to shape a story that lenders trust and one you can live with too.

Review All Existing Debts

First things first: stop avoiding your numbers. Open the bills. Log into the weird old credit card you forgot you had. Write it all down: the balances, interest rates, due dates, everything. You're not doing this to punish yourself. You're trying to see what's dragging your profile down the most. Lenders will check your debt-to-income ratio, but before they do, you should know it inside out. This is your foundation. You can't fix what you haven't faced.

Select a Debt Repayment Approach

Not all debt hits the same. Credit cards with high interest? Heavy anchors. Student loans with manageable rates? Maybe less urgent. The point here isn't to "be debt-free" – it's to make progress lenders can see. Pick a method and stick with it. Some people knock out small balances for momentum (snowball). Others target high-interest debts first (avalanche). What matters is that you keep moving, one payoff at a time, and keep your credit utilization from ballooning.

Organize and Format Financial Documents

You know all that paperwork you've got sitting in drawers or emailed to yourself six months ago? Yeah, you'll need that soon. Lenders ask for tax returns, bank statements, pay stubs, and sometimes, they ask twice. Save yourself the chaos and get organized early. Make sure your files are labeled, current, and sharable. PDFs work best, especially if you're bouncing documents between realtors or brokers. If you need to convert files, this is a good option that lets you drag and drop any file and turn it into a clean, secure PDF – no stress.

Avoid Taking on New Debt

No one tells you this, but one of the best things you can do during this phase is… nothing. Don't finance a new car. Don't open that flashy rewards card. Even a "good" new loan can tank your profile for a while. Lenders hate sudden changes. They want to see a calm, steady picture – not financial whiplash. So yeah, maybe hold off on big purchases. The couch can wait.

Establish a Consistent Monthly Budget

This isn't about becoming a spreadsheet zombie. But you do need to know where your money's going. Set a budget that leaves room for two things: knocking down debt and stacking up savings. Skip the "starve yourself" approach; it won't last. Instead, look for patterns. What keeps bleeding your cash every month? Fix that. Even small gains matter right now, especially if you're living off one paycheck or juggling side gigs.

Balance Savings & Debt Reduction

Here's the thing: some people will tell you to go all-in on debt. Others say focus on saving for your down payment. Both are wrong if you go to extremes. You need enough in savings to look stable and low enough debt to qualify. It's a weird balancing act. If your debt has low interest, you might shift toward saving. But if your minimums are eating your budget, you'll want to shrink them before your pre-approval. Think ratios, not rules.

Prepare a Lender-Ready Financial Profile

Credit scores matter, yeah. But lenders look beyond that. They want to see a financial life that's clean and coherent. That means: your job history lines up, your income's consistent, and your obligations aren't exploding. Double-check your credit reports now not next month. Get ahead of any weirdness that might hold you back. And yes, keep your accounts stable. Don't pay off and close old cards just to feel tidy. That can backfire.

You don't need to be debt-free to buy a home. But you do need to show that you've got a grip on your money. This isn't about proving perfection. It's about building trust – with lenders, with yourself, with the process. Six months from now, you'll either be scrambling or walking into that meeting with confidence. Start now. The next smart decision you make could be the one that gets you the keys.

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