Should I pay my bad debts before house hacking ?

Question

Hi my name is Willy German I am interested in becoming a real state investor in the tri-state area. I have two personal loans with a total of $15,000. However i would like to know if i should pay of this debt before i could house hack my first deal?

Theresa Harris · Answer

What is the interest rate on your debt? and are you able to get a loan for the amount you need to buy a house with that debt?  If the rates are low and you can get the mortgage you need, buy the house.  Your living costs should go down if you are renting out rooms or part of the house giving you the extra money to pay the loans down faster.

Anthony Martinez · Answer

im on the same boat im just about done with about 50k in bad debt . Honestly i didnt even connect with a lender about it, i just figured it would make investing as a whole easier if i didnt have any bs debt in the way.

Whitney Hutten · Answer

@Willy A German Agreed.  You should speak to a lender to see if you can qualify with the debt in place.  Paying off the debt can help lower your DTI and raise your credit score, which is more appealing to a lender.  See what they say!  If you can qualify with the debt in place, you can put your money potentially to higher and better use investing.  This is if you can get a higher return investing than paying off the debt.  There are many levers to think about!

Abel Curiel · Answer

Hello @Willy A German,

I'd recommend you connect with a lender who can look into your financial situation as a whole - income, debt, savings, credit, target property type and target price range for properties.

They may recommend paying it all off in order to decrease your debt to income ratio (DTI) but I wouldn't take anyone's advice on this unless they're looking at the entire picture.

Best of luck to you moving forward!

Abel

Willy A German · Answer

@Whitney Hutten thank you for the advice. I would check out with my bank.

Willy A German · Answer

@Abel Curiel, Thanks I appreciate that, I’am definitely going to do that.

Should I pay my bad debts before house hacking ?

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