Get your debt situation shaped up as soon as you can. Not only will this fiscal fitness program lift your qualifying ratios, it may also boost your credit scores.
Here are some tips:
1. Consolidate bills. One loan consolidation payment of $280 a month will hurt you less than four seperate bill payments of $125 each. However, don't close three accounts and run one up close to its credit limit. Credit scoring doesn't like "high" balances relative to credit limits.
2. Pay down debt. If your installment debt has only 11 or 12 months to go, prepay two or three payments. That pushes those debs off the table and out of sight--under the rules followed by most lenders.
3. Pay off debt. If you can swing it, get rid of as much debt as you can.
4. Avoid new debt. No matter how much you are tempted, do not take on new debt prior to applying for a mortgage. Even if you can easily afford it, wait until after you've closed your mortgage. To build wealth, permanently swear off destructive debt--debt you incur to pay for depreciating assets or wants rather than needs.
These tips especially apply if your ratios push against the lender's guideline total debt limits, if your credit score falls below, say, 680, if you're requesting a low-down-payment loan (a loan-to-value ratio of greater than 80 percent), or if you're trying to qualify for a non-owner-occupied investment property.
A pint-sized debt load will offset any warts in your borrower profile.
from "The Beginner's Guide To Real Estate Investing", 2nd Edition by Gary W. Eldred, PhD
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