Debt Consolidation Helps Mortgage Process

Allison Beatty
LoanBiz Columnist


Before applying for a mortgage loan, take a cold, hard look at your debt load. If the picture is less than perfect, don't worry. There are many ways to consolidate debt and get the loan you want.

Be Realistic About Debt Consolidation

The first step in debt consolidation is to chronicle what you owe. Make a chart of each credit card, mortgage, or other payment obligation with information on the amount owed and the due dates.

Reducing Debt

Now, look for ways to consolidate debt and reduce your monthly financial obligations. Can you:

• Reduce spending? Make a monthly budget and stick to it by cutting out unnecessary spending.
• Earn more money at work or with a new part-time job?
• Shift debt to a home equity loan with a lower interest rate?

Knowledge is the Key to Mortgage Loan Process

As you prepare to apply for a mortgage, it pays to review all your credit information. Start by getting a copy of your credit report and reviewing it for inaccuracies in:

• Your employment history
• Your credit accounts, including how many you have open and the credit limits of each.
• Payment history. Pay close attention to notations regarding late payments. Are they accurate? What can you do to stay on track with payments?

Debt Consolidation Loans

There are a variety of debt consolidation loan options for those who are trying to pare down their obligations. Among the options are:

• Combination fixed and variable rate mortgages. The fixed rate is for the first two or three years of the home loan, offering a stable payment plan as you start debt consolidation.
• Low introductory rates, which offer a lower initial monthly payment to ease your financial load in the first few years. These are ideal for those who plan to move before the initial payment period ends.

Debt consolidation can be a difficult process, but one that is well worth the effort. As you look toward a new mortgage, create a plan for paying down your debt and securing the mortgage you want.

About the Author
Allison E. Beatty is a syndicated real estate writer who has been writing home improvement columns for 15 years.