Columbus Debt ReductionIn our prior blog post, we talked about what rising interest rates mean for Columbus home buyers. As we mentioned, rising interest rates will also impact anyone who is carrying variable-rate debt, which commonly includes credit cards. Today we’re sharing debt reduction strategies that can help you save money, while putting you in a stronger position for future home ownership!

1. Know where you stand. List all of your debt payments and balances. Include medical bills, student loans, installment debts and credit cards.

2. Know what you have to work with. Create a household budget that itemizes your income, monthly expenses and debt payments. Include your costs for groceries, clothing and prescriptions. Use estimates when necessary.

It can be helpful to use a spreadsheet. Try this budget worksheet from Kiplinger or select one from Microsoft Office. If you’re looking for an all-in-one online budget and payment tool, try Mint.com.

3. Choose a debt reduction strategy and budget for it accordingly. Here are two main strategies to consider:

Pay extra towards the highest-interest debt first. Find the ugliest credit card you have; the one with the highest interest rate. Apply extra payments towards this card while making the minimums on everything else. In the long run, this strategy saves you the most interest expense. But you must be patient; results take some time to show, and payoff of a large balance can take years.

Just remember that when you pay extra (known as pre-paying) you are basically investing your money at the interest rate of the account. So if you have a $1,000 balance at 7% and a $200 balance at 4% it still makes more sense to pre-pay on the 7% account. Be disciplined!

Free up cash flow by paying off smaller debts first. This strategy provides a faster sense of accomplishment. It also frees up money to help you attack other, larger debts. Begin by paying all you can towards your smallest-balance account, while making minimum payments on your other debts. Once the smallest account is paid off, apply the monthly sum you were directing to it, toward your next smallest account, along with the minimum payment you were already making. And so on, from there. The snowball effect of improving cash flow makes the bigger bills easier to tackle!

4. Put time on your side. Creditors will accept smaller payments, as long as they amount to your minimum required payment by the monthly due date. In other words, if you’re paid bi-weekly or weekly, start breaking the monthly payments down accordingly. Making smaller payments more often translates to making more payments over time! This improves the amortization of the debt, helping reduce the interest accrual, and resulting in faster payoff.

5. If you are struggling with debt, don’t be afraid to seek help! The National Foundation for Consumer Credit, or NFCC, is a nonprofit financial counseling organization. They can work with your creditors to negotiate lower rates, stop collection activity and reduce your monthly payments. Find a credit counselor in your area by calling 1-800-388-2227, or visit NFCC.org.

When you are ready to find a mortgage lender or buy a home, we’ll be here to help you! As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

Columbus Home BuyersAs expected, the Federal Reserve raised its benchmark lending rate on March 15, moving its overnight lending rate from 0.75% to 1%. This isn’t earth-shattering news by itself, but Columbus home buyers need to pay attention to it for several reasons.

For example, this is the second rate hike by the Fed in three months, and more increases are expected later this year. Here’s how it could affect you.

Consumers with variable-rate debt, such as credit cards, home equity lines of credit and adjustable-rate mortgages, could see an increase in their minimum required payments in as little as 60 days, depending on the type of debt and its terms.

Mortgage rates have already been trending higher during recent weeks. As of March 16, Freddie Mac’s weekly mortgage survey shows 30-year fixed-rate mortgages averaging 4.30%. This is the highest rate average so far in 2017. A year ago, this same mortgage had a rate of 3.68%.

Here’s another wrinkle to higher rates: they will affect the debt-to-income calculations (DTI) used by mortgage lenders to determine home affordability. If you are carrying variable-rate debts, like credit cards, increases in those rates could impact your monthly debt payments, and affect your front-end DTI.

Front-end DTI refers to the percentage of your monthly income that is taken up by existing debt payments. Back-end DTI considers your new, proposed mortgage payment on top of your existing debt payments. Bottom line: when interest rates move higher across the board, it means you qualify for less house.

When rates move up, and home prices are increasing, the home buying dollar doesn’t stretch as far. This is why progressive increases to interest rates could eventually push some first-time buyers, and others who are on the margins of mortgage qualification, out of the housing market.

As a future home buyer, one of your best defenses against a rising rate environment is to pay down and pay off your consumer debts! We’ll share some debt reduction strategies in a future blog post! And when you’re ready to obtain your mortgage pre-approval, we’ll refer you to trustworthy, local lenders.

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

Millennials Take the Lead in Home Buying Activity

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For years, real estate industry analysts bemoaned the apparent lack of interest Millennials had in home ownership. It seems Generation Y was merely biding its time! Millennials are now the dominant generation among all home buyers, according to a report by RISMedia. Here’s some highlights from the report! As of January 2017, Millennial home buyers […]

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Enjoy March 2017 Events in Metro Columbus!

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Should Columbus Home Buyers Purchase a “Flip?”

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Home flipping is on the upswing again in the Columbus Metro, according to a recent report in Columbus Business First. During 2016, 5.3% of Columbus area home sales were flips, up 1.3% from 2015. At its peak in 2006, flipped homes accounted for 6.3% of all Columbus home sales. While Columbus isn’t exactly a hotbed […]

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Quarterly Market Statistics – 4th Quarter 2016

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Avoid Buyer’s Remorse When Buying a Columbus Home!

February 7, 2017

Buying a Columbus home takes financial preparation, good planning, time and patience – as well as the expert guidance of an Exclusive Buyer’s Broker! Without these things, home buyers are apt to feel more frustrated by the process, and may experience buyer’s remorse after choosing a home that may not be right for their needs. […]

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February 2017 Events in Metro Columbus!

February 3, 2017

When you live in Metro Columbus, cabin fever isn’t a problem, because there’s something fun happening year-around! Bundle up, get out, and enjoy these special events and attractions happening in February! February 1-March 5: Orchid Exhibit at Franklin Park Conservatory: Think Spring as you browse among thousands of orchid blooms and tropical plants, artfully arranged […]

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2016 Robust Year for Central Ohio Home Sales

January 26, 2017

Central Ohio home buyers had a busy year in 2016! According to recent articles in Columbus Business First, Franklin County saw a post-recession record in property transactions last year, with 23,290 home sales completed. This is a gain of 12% from 2015. Franklin County’s median home price increased to $166,669 during 2016, up from $157,625 […]

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