[Jennifer Medeiros]

I’m in debt. Credit cards, installment debt, car loans, you name it, I owe it. I really want to purchase a house but every time I think about it, I move one step forward, two steps back. How much debt is acceptable when trying to purchase a home? Is there a specific kind of debt I need to completely eliminate? Also, how long do I need to show that my situation has improved? An entire year, or closer to 6 months?

[Sum180 Lead Coach]

For many people, owning a home is the number one wealth-building asset so we are routing for you on your goal. Not knowing your specific circumstances, I’ll give you a few guidelines we use when we develop recommendations here at SUM180, which I think will shed some light on what you are looking for.

In general, total debt of all kinds, including mortgage, should be 40% or less of your income. If adding mortgage debt to your other debt puts you over that percentage, you should reduce other debt as quickly as possible. In reducing debt, you want to pay down the debt that has the highest interest rate first, usually credit card debt, because more your payments on higher interest rate debt are going toward interest, taking it a lot longer to pay off the balance you owe.

In addition to the level of debt you have, your credit score will matter for determining whether you can get a mortgage and how much it will cost. In terms of working to improve your credit score, when it is improved, you are good to go. Sharing your specifics with a reputable, non-conflicted credit counseling service can lead to good ideas for ways you can lower your debt levels as quickly as possible.