Pay Off Debt Before Buying a House

Should I Pay Off Debt Before Buying a House?

Should I Pay Off Debt Before Buying a House?

I never truly understood the saying “more money, more problems” until I actually started making more money. I’m not rich by any means, but every time I get a raise, a bonus, or a promotion, I go out and spend more money, which leads to more debt and more problems. Most of us want to end our cycle of spending and become financially free. Unfortunately, increased spending with increasing earnings is just the start of our debt woes; it gets even more complicated when you start thinking about bigger, more necessary purchases.

If you’re anything like me, the more money you’ve made, the more you’ve thought about that one massive investment we all aspire to — a home of your own. A house is a more worthwhile purchase than most things, but the prospect can leave us wondering how to prioritize our debts. Obviously, the fewer debts you have, the easier it will be to qualify for a mortgage loan, right? Not necessarily. Before picking out your dream home or starter home, you need to figure out which debts to eliminate and which to work on in the long run — a task which can be frustratingly complex.

Paying Off Debt Before Getting a Mortgage

So, here’s the big question: should you pay off debt before buying a house? The short answer is yes, by all means, you should pay off debt before buying a house. But, you absolutely must do it strategically. And you probably shouldn’t close all credit card accounts, or you could ruin your chances of even qualifying for a mortgage. If you have no debts (credit card accounts or otherwise), you could ruin your Debt-to-Income ratio (DTI), which is what banks look at to determine your borrowing capacity.

Banks use your DTI in order to score your ability to handle a mortgage loan. DTI is calculated by dividing your total minimum debt by your gross monthly income. If you have two minimum monthly payments of $500 each and a monthly income of $3000, your DTI is 33 percent (1000 divided by 3000), which is a pretty good DTI.

According to Investopedia, “a low debt-to-income ratio demonstrates a good balance between debt and income. In general, the lower the percentage, the better the chance you will be able to get the loan or line of credit you want.” With DTIs, the lower the better. But, if you’re looking for a DTI ratio to shoot for, try to stay under 40 percent, with a max DTI being 43 percent.

Becoming Debt-Free While House Hunting

You probably already noticed that becoming completely debt-free might not be as simple as it sounds, especially when house hunting; you almost need to approach the matter sideways. Instead of just paying off all of your debts blindly, you should pay attention to what your debts do to your home-buying chances. Most people would pay off high interest debts first, in order to save more money. However, one of the best things you can do to qualify for a great mortgage loan is to make big payments on big debts — which leads to a better mortgage.

You’d think it would be safest to pay off your high-interest debts first, but that doesn’t really help your chances with the bank. In reality, paying off debts with large payments does signal to the bank that you might be prepared for the responsibility of mortgage payments.

For example, if you have a $10,000 (15 percent interest) credit card bill and about $10,000 dollars to pay bills, paying a big chunk of your $15,000 (0 percent interest) debt will actually help you more than paying off your entire credit card bill.

So you can go ahead and pay off those high-interest debts if you want, but the banks aren’t highly interested in them. What’s really impressive to banks and mortgage companies is if you can pay off debts with big payments (regardless of interest). According to Fox Business, “banks and mortgage companies do factor in what you are obligated to pay each month as a benchmark for determining your credit capacity.”

When you think about approaching paying debts vs. buying a home, remember these two important facts: first, your credit score will affect your interest rate. Second, your income (minus your payments on current debts) will signal to banks how much money you can borrow. It might be a bit complicated at first, but if you stick with it, do enough research, and ask for advice from friends, you’ll be much more equipped to handle life’s financial challenges and enjoy its rewards.

 

Debt Settlement – 3 Marketing Tricks to Avoid

Debt settlement can be a stressful process, even before you enroll. Doing the research can add to your anxiety as you visit different sites, read reviews and try and determine who is the best debt settlement company for your needs. If you haven’t done so already, I suggest reading “5 Important Questions to ask Before You Sign Up.” 

As you do your research, it’s important to know that many debt settlement companies use misleading marketing tactics. To help you spot these deceptive tactics, we’ve put together a list of three common marketing tricks used by debt settlement companies.

Trick 1: Being deceptive about the fees. Most reputable companies charge no up front fees these days. In fact Federal law mandates it. If you shop around, most companies charge anywhere between 18-25% of the debt you enroll. However, some companies have recently started quoting these figures on an Annualized basis. So if the fee is 24% of the debt, but the program is 4 years, they quote “approx 6% per year.” Six percent sounds a lot better than 24% right? The fact is it’s misleading and our employees are hearing it more and more when consulting with consumers.

What Does Your Debt Relief Program Cost?

Trick 2: Bait and switch from personal loan to debt settlement. This is one of the most common tactics being used today by debt relief providers. Debt Settlement companies are sending out direct mail pieces offering a consolidation loan that sounds too good to be true. Unfortunately, it is too good to be true. After the consumer calls in to apply for the personal loan, they are told that they don’t qualify. Most consumers won’t qualify. The sales agent then presents the consumer with “good news!” The “good news” is the debt settlement program, which the consumer conveniently does qualify for. Here is an example of what these mail pieces typically look like:

Deceptive Marketing Tactics

Trick 3: All the Client Reviews are from recent enrollments. Many companies, including Pacific Debt, solicit reviews from customers on sites such as TrustPilot, BestCompany and Google. To read reviews about Pacific Debt, you can visit our website here, check out our blog or simply google “Pacific Debt reviews”. Reading actual customer reviews is a great way to hear what others are saying about a company. However, it is important to read several reviews to determine the quality of those reviews. Is the company simply asking for reviews from customers who just signed up or from those who have actually completed the program? Debt settlement is usually a 3-4 year program, so clients who have been enrolled for more than a few days are better suited to give an actual review of the service.

At Pacific Debt, we ask for reviews from new enrollments, active customers as well as recently completed clients. Some of our competitors only ask for reviews from recent enrollments. Recently enrolled customers are more inclined to hand out a 5 star review because they are happy to get help. Reviews from consumers who have experienced settlements and dealt with customer service over the course of many years, should carry more weight than reviews from brand new customers. So be mindful when you scan through the reviews of the debt settlement company you are researching, you should be able to read at least some reviews like these:

Pacific Debt is the Best Debt Relief Company

Review from BestCompany.com 3/17/18

Pacific Debt is the Best Debt Relief Company

Review from Google Feb 2018

 

So as your embark on your quest to find the best debt settlement company, please be mindful of these common misleading marketing tactics. If you’d appreciate a free evaluation of your situation, from a company that has been helping consumers for 16 years, call our team today at the number above. We can help you assess your situation and see if debt settlement is right for you. If not, we can connect you with a Trusted Partner who might be better suited to help. We are also happy to pass along some free advice and point you in the right direction.

Get Budget Help With Budget Apps

What Are The Best Budgeting Apps of 2018?

The Best Budgeting Apps of 2018

Most people believe in the power of budgeting; some people think it’s just an excuse to avoid the real solution. Richard Quinn, a retired VP of Compensation and Benefits with over 50 years of experience in managing pension and 401k plans for a fortune 200 company, offers some profound advice about budgeting. One particular thing he mentioned about budgeting apps will strike a chord with most budgeting experts. According to Quinn, “Nobody needs an app. They don’t even need a budget. They need to do a few simple things: Take their net pay and save 10% or more, throw away all credit cards, buy what you can afford only and spend all you want after fixed expenses. No budget needed.” What Quinn suggests may shock some at first, but it makes sense. Essentially what he is asking is for you to be smart with your money. Stop spending it first and start saving it first.

Yet, there remains a virtue in budgeting apps that might be overlooked in Quinn’s suggestion. What a budgeting app does is it disciplines and trains you to be the type of spender that Quinn envisions. If you have already achieved a high level of self control, you don’t need an app; in that case, as Quinn says, you don’t even need a budget. For the rest of us—those who are still learning to spend wisely and save regularly—we need a bit of help. Here are the best budgeting apps for those who need extra help in 2018.

YNAB (You Need a Budget)

Budgeting apps come in all shapes in sizes. The best one will mostly depend on your personal taste, but for Larry Ludwig, Founder of Investor Junkie, “YNAB is the clear winner.” Ludwig explains that YNAB is his favorite for its simplicity and lack of confusing “bells and whistles” and notes that “for a first time budgeter, it’s important not to intimidate them with a complicated user experience.” The app’s website explains its method in three simple steps: “Get some dollars, prioritize those dollars, and follow the plan.” Those who are in debt are often swamped by numbers and projections of how much they need to spend or save. YNAB is a simple solution to get you back on track or stay on track.

Honeyfi

One of the coolest new budgeting apps is called Honeyfi, made for not only helping one person manage finances, but helps two at the same time. Most married couples have a hard time negotiating spending limits, individual allowances, and other finance rules. In the words of Sam Schultz, Co-Founder of Honeyfi, the free app seeks to solve that problem by helping “couples save more money, pay down more debt, and make better decisions.” Featured in HuffPost, MSN, and Entrepreneur, Schultz explains that the app does “spark a lot of communication IRL” and that it also allows “users to decide how much to share with their partner for each account (balances and/or transactions).” If you’re a couple looking to manage not one, but two different budgets, Honeyfi is a great option.

Mint

According to Brian Bartold, a licensed insurance professional with VFG Associates in Livonia, MI, the best overall budgeting app is Mint. This app lets you link “everything to the app including your credit cards, bank accounts and any brokerage or IRA accounts you have.” Though it might not have the speciality in helping couples like Honeyfi, Mint allows for more in-depth budgeting. Bartold also explains that Mint “also works with TurboTax and QuickBooks, two very popular programs for managing your taxes and bills.”

Even though Mint isn’t quite as cut and dry as other apps, it does simplify more complicated budgeting issues, like losing a job or going through a divorce, in a very helpful way. This simplification is possible because the app puts all financial processes in one place. Bartold explains this, saying “you may work with an insurance agent, stock broker, someone in your 401(k) department, all while doing stuff you are doing on your own. All those things are not being managed in one specific area. Using an app that combines everything you’re doing can make planning and budgeting simpler.” Mint is a great option for those with more money to budget and more financial issues to maneuver.

PocketGuard

The best part of the PocketGuard app is that it lets users link directly to their bank accounts so that all transactions and balances are current. As opposed to many other budgeting apps, PocketGuard is more focused on spending projections than it is past history. Because of this, the app can let you know how much pocket change you have to spend on any given day or even month. The app is a great alternative to Mint or YNAB if those apps aren’t to your liking.

As Richard Quinn pointed out, the best budgeting system available is your own persistence and determination. The purpose of a budgeting app should be to make your savings methods become habitual. Whether it’s Mint, PocketGuard, Honeyfi, YNAB, or some other budgeting app, make sure you are learning self-sufficiency and responsible spending. The most efficient budgeting tool should be your habits.

 

How Katherine in Michigan Was Able to Retire Debt Free

Name: Katherine

Age: 62

Location: Michigan

 

When did you enroll in our debt settlement program and how much debt were you facing?

I had about 23,0000.00 worth of debt with 2 credit cards.

Why did you choose Pacific Debt over the options and companies you researched?

When I was looking for a company, basically, I went thru and saw Pacific Debt, I called and was put in touch with Josh Hallas.  In just speaking to him and his reassurances, I knew this was the company I was supposed to deal with.  Josh explained the company and just what we would have to do and he sent me the paperwork, and that was that.

Tell us about your journey through the Pacific Debt program? Are there any special team members you would like to recognize?

I have had Josh Hallas primarily throughout my whole journey.  There was another gentleman that I was dealing with, but then I was transferred back to Josh.  The last person I dealt with was Bethany R.  She was very helpful, but I was always transferred back to Josh.

How does it feel to be debt free? What are your financial goals moving forward?

It feels like a weight has been lifted off my shoulders and now I can retire knowing that I don’t have any financial debt hanging over my head.  That was and still is my primary goal.  Without the help of Josh and the other folks that had my case, this probably wouldn’t have been possible  – for me to retire without any debt.  I want to thank all the people at PDI who were there for me when i needed that little push to get myself out of a sticky situation.  I would recommend PDI to anyone who was in the situation.

We know we are not perfect. What suggestions or advice would you offer to help us improve our program? All advice is welcome.

I can’t think of anything that you would need to change, all of your people are very kind, courteous and helpful.  I thank them all from the bottom of my heart!!

Meet Christopher – Now Debt Free Thanks to Pacific Debt

Name: Christopher

Age: 35

Location: California

 

When did you enroll in our debt settlement program and how much debt were you facing? How did carrying all of that debt make you feel?

We enrolled March 2016 in Pacific Debt’s program, with $23,176 in debt. Carrying that much debt made it almost impossible to make ends meet. We could make only minimum payments, and would immediately be checking balances and available credit to see which card we could use next. Purchases were for necessities, not fun or frivolous items. We lived credit card limit to credit card limit.

 

Christoper, Debt Free, Pacific Debt

Tell us about your journey through the Pacific Debt program? Are there any special team members you would like to recognize?

Our journey through Pacific Debt’s program was worry free and easy. We were contacted immediately whenever something was needed, and we were informed of every step taken along the way. Brian LoBianco was amazing to work with! He took care of our account and our debts in the fastest way possible, never neglecting quality service, and ended up getting us great settlement agreements with our creditors. He was professional at all times, and we could tell that he cared about us and the assistance he provided.

 

How does it feel to be debt free? What are your financial goals moving forward?

It feels amazing to be debt free! One thing this program allowed us to do is learn how to live without using credit. By not being able to use our cards, and by lightening the load that we carried, we were able to manage our budget in a credit free way, realizing what we really needed, and what we could do without. Our financial goals are to continue to live completely free of revolving debt, not having to worry about paying high interest for what easily could have been the rest of our lives doing what we were doing before.

 

We know we are not perfect. What suggestions or advice would you offer to help us improve our program? All advice is welcome.

I honestly was completely satisfied. I will say, the first 6 months to 1 year of creditor/collector phone calls was nerve racking. Understanding that things had to get worse before they could get better was key, though it was still a time that worried us. Pacific Debt made sure we understood the process, and what to do with those calls and contacts, and that made all the difference. We knew Pacific Debt was in our corner the whole time.

Read Over 1300 Real Pacific Debt Client Reviews

At Pacific Debt we’ve always focused on providing an awesome customer experience and delivering great results. Over the past 15 years, our team has settled over $200 million in consumer credit card debt and helped tens of thousands of individuals and families.

A couple of years, ago, our team started actively asking our customers to share their experiences online, so that others who are struggling with debt could see for themselves the power of our program. In that time, our customers have shared over 1300 online reviews, with an average weighted user score of 9.47 out of 10.

Consumers who are struggling with excessive credit card debt are often unsure where to turn for help. Being an Accredited Debt Relief provider is no longer good enough for consumers who are living in the age of Yelp and Amazon, where real customer feedback and reviews are easy to come by. We’ve found that these first hand experiences, from real customers, really make a big difference for consumers who are weighing their options and evaluating different companies.

While the majority of reviews are overwhelmingly positive and validate our program, we don’t turn a blind eye to opportunities for improvement. Any negative feedback received is used as a customer service opportunity and we follow up with our clients to better understand their situation and see what can be done to turn things around for them.

Read a Recent Review

To highlight the power of our online customer reviews, here is a recent review from Marissa in Pittsburgh, Pennsylvania via BestCompany.com:

“After doing some research and reading online reviews, I decided to reach out to Pacific Debt for help with my credit card and loan debt. I worked first with Rian to go over who they are as a company and how they were going to help. After being setup and starting their program, Kimberly B. became my account manager and main point of contact throughout this program. She’s awesome and keeps me in the loop regarding my account and settlement progress. It is easy to get in contact with anyone at Pacific Debt with questions or concerns. They understand your situation and answered any and all questions that I had.”

Read More of Our Reviews

For consumers interested in reading our online reviews, a compilation of our real client reviews can be found below:

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