by Tyler Brunell | Mar 19, 2024 | Debt |
What is a Debt-to-Income Ratio?
If you’ve been exploring mortgage loans recently, you’ve likely encountered the term “debt-to-income ratios” (DTI). This ratio is crucial in the eyes of lenders when evaluating your eligibility for personal or conventional loans.
Debt-to-income ratios represent the percentage of your monthly gross income (pre-tax) allocated to servicing monthly debt obligations. These obligations encompass various payments, including mortgage payments, rent, insurance premiums (like homeowners insurance), outstanding credit card bills, and other personal loans.
Lenders assess two types of ratios: front-end and back-end. The front-end ratio indicates the proportion of your income allocated to housing expenses, while the back-end ratio encompasses all recurring total monthly debt payments, excluding living expenses such as food and utilities.
This guide will focus on how to calculate debt to income ratio, particularly the back-end ratio.
Mastering Debt-to-Income Ratios
To calculate your back-end debt-to-income (DTI) ratio, you must first determine your gross monthly income before taxes, accounting for all income sources.
Next, tally your monthly payments, which can be easily determined if you’ve already created a budget or used a free debt management tool. Ensure you include credit card bills, student loans, car loans, rent or mortgage payments, insurance premiums, child support, personal loans, and other debt payments.
Finally, to compute your debt-to-income ratio, divide your total monthly debt payments by your monthly gross income. To obtain a percentage, shift the decimal point over to the right twice.
Here’s an example of how to calculate a monthly debt-to-income ratio:
Monthly debt total:
– Mortgage payment: $1,100
– Car loan payment: $300
– Credit card monthly payment: $200
Total monthly debt payments = $1,600
Monthly gross income:
– Primary job: $3,000
– Part-time job: $1,200
Total monthly gross income = $4,200
Debt-to-income (DTI) calculation:
1. Divide your total debt by your total income:
$1,600 / $4,200 = 0.3809
2. Multiply the result by 100 to find your percentage:
0.3809 x 100 = 38.09
3. The calculated debt ratio is 38.09%.
What’s Considered a Good Debt-to-Income Percentage?
Aim for an Optimal DTI Range
Typically, an acceptable DTI ratio should be at or below 36%. Many lenders, especially mortgage lenders, require a debt ratio of 36% or less. In the example provided above, the debt ratio of 38% is slightly higher. However, certain loans may allow for higher DTIs.
Why Does Your Debt-to-Income Percentage Matter?
Understanding DTI’s Impact on Financial Health
Your DTI serves as a reflection of your financial health. It offers insights into your current financial standing and aids in determining comfortable debt levels, influencing whether you should apply for additional credit.
Mortgage lenders aren’t the sole users of this metric. Lenders offering credit cards or auto loans may also utilize your DTI to assess lending risk. Excessive debt may hinder loan approval.
How Does Debt-to-Income Ratio Affect Credit Scores?
DTI Ratio and Credit Scores
Your income doesn’t impact your credit score directly. Consequently, your DTI doesn’t affect your credit score either.
However, 30% of your credit score is based on your credit utilization rate or the amount available on your current line of credit. To maintain a good credit score, aim for a utilization rate of 30% or lower, implying minimal debt and consistent payments.
Strategies to Lower DTI Ratio
Efficiently Lower Your DTI
The only effective means to reduce your DTI ratio is by paying down debts or increasing your income. Understanding your accurately calculated ratio enables you to assess your debts and determine manageable levels.
Avoid temporary fixes like forbearance on student loans or excessive store credit card applications, as they only delay debt repayment without addressing the root cause.
What’s the Ideal Back-End Debt-to-Income (DTI) Ratio?
Aiming for an Optimal DTI Ratio for Lenders
Ideally, aim for the lowest ratio possible in the long term.
Here’s a breakdown of recommended DTI ranges:
– 36% or less: Ideal
– 37%-42%: Acceptable
– 43%: Lenders typically set a maximum, with some exceptions, up to 45%
– 50% and up: FHA allows DTIs below 50%, with exceptions for FHA or VA mortgages
For mortgage or auto loans, it’s advisable to keep your back-end DTI ratio below 43%, with 35% or less considered “ideal.”
Seeking Assistance to Lower Your DTI Ratio?
Leverage Expert Help for Improved DTI
Your debt-to-income (DTI) ratio serves as a critical tool in assessing your financial situation. If you’re struggling to reduce your ratio or seeking financial guidance, our expert coaches are available to assist you. Contact us today to learn more about how our Debt Management Plans can help you regain control of your monthly debt obligations.
by Tyler Brunell | Apr 10, 2024 | Credit, Loans |
Your credit scores play a crucial role in determining your eligibility for a home loan. These three-digit numbers, typically ranging from 300 to 850, reflect your credit history and payment behavior as a borrower. Mortgage lenders use credit scores to assess your creditworthiness and potential risk as a borrower.
Credit Scores and Mortgage Approval:
When you apply for a mortgage, lenders consider your credit scores alongside other factors like income and employment history. While credit scores are not the sole determinant, they significantly influence whether you qualify for a loan and the loan amount you’re eligible for.
Generally, higher credit scores enhance your chances of mortgage approval. Lenders view borrowers with higher scores as a lower risk, offering them lower interest rates and favorable loan terms.
Minimum Credit Score for First-Time Homebuyers:
For conventional mortgages, most lenders require a minimum credit score of 620 for approval. If your credit score falls below this threshold, you may struggle to secure a conventional loan.
Options for Low Credit Score Homebuyers:
Fortunately, there are options tailored for first-time homebuyers with lower credit scores:
- FHA Loans: Backed by the Federal Housing Administration, FHA loans cater to low- to moderate-income homebuyers with credit scores as low as 580 (with a 3.5% down payment) or even 500 (with a 10% down payment).
- VA Loans: Available to eligible veterans and service members, VA loans typically have no standard minimum credit score requirement, although individual lenders may impose their own criteria.
- USDA Loans: Offered by the U.S. Department of Agriculture, USDA loans target low- to moderate-income homebuyers in select rural areas. Credit score requirements vary by lender.
Improving Credit Scores for Homeownership:
First-time homebuyers can take steps to boost their credit scores:
- Set a Budget: Establish a budget to manage expenses and prioritize debt repayment.
- Make Timely Payments: Consistently pay bills and outstanding debt on time to improve your payment history.
- Reduce Debt: Focus on reducing existing debt levels to lower your debt-to-income ratio.
- Review Credit Reports: Regularly monitor your credit reports for inaccuracies and address any issues promptly.
Bottom Line
By actively working to enhance your credit profile, you can increase your chances of qualifying for a mortgage and securing favorable loan terms as a first-time homebuyer. Remember, improving credit takes time and diligence, but it can significantly impact your ability to achieve homeownership goals.
by Abigail Masterson | May 13, 2020 | Debt |
If you’ve recently been in the market for a mortgage loan, you may have come across the term “debt-to-income ratio.” This ratio is one of the many factors lenders use when considering you for a loan.
But what is a debt-to-income ratio?
A debt-to-income-ratio (DTI) is the percentage of your gross monthly income that goes to debt payments. Debt payments can include credit card debt, auto loans, and insurance premiums.
How to Calculate DTI
In order to calculate your debt-to-income ratio, you need to determine your monthly gross income before taxes. This must include all sources of income you may have.
Next, determine what your monthly debt payments are. If you’ve already created a budget, this should be easy. Be sure to include credit cards, auto loan, mortgage, and so on.
The final step in calculating your debt-to-income ratio is to divide your total monthly debt payments by your gross monthly income. To get a percentage, move the decimal point over to the right two times.
Here’s an example of a debt to income ratio formula calculation:
Monthly:
Mortgage: + $1100
Auto loan: + $300
Credit card payments: + $200
Monthly debt total = $1600
Monthly income gross / $4200
1600 / 4200 = .3809
0.3809(100) = 38.09
Debt ratio = 38%
What is a Good Debt-to-Income Ratio?
Generally, an acceptable debt-to-income ratio should sit at 36% or below. Some lenders, like mortgage lenders, generally require a debt ratio of 36% or less. In the example above, the debt ratio of 38% is a bit too high.
However, some government loans allow for higher DTIs, often in the 41-43% range.
Why is Your Debt-to-Income Ratio Important?
A DTI is often used when you apply for a home loan. Even if you’re not currently looking to buy a house, knowing your DTI is still important.
First, your DTI is a reflection of your financial health. This percentage can give you an idea of where you are financially, and where you would like to go. It is a valuable tool for calculating your most comfortable debt levels and whether or not you should apply for more credit.
Mortgage lenders are not the only lending companies to use this metric. If you’re interested in applying for a credit card or an auto loan, lenders may use your DTI to determine if lending you money is worth the risk. If you have too much debt, you might not be approved.
How Much Does Debt-to-Income Ratio Affect a Credit Score?
Your income does not have an impact on your credit score. Therefore, your DTI does not affect your credit score.
However, 30% of your credit score is based on your credit utilization rate or the amount available on your current line of credit. Generally, your utilization rate should be 30% or lower to avoid having a negative effect on your credit score. That means that in order to have a good credit score, you must have a small amount of debt and actively pay it off.
What is the Best Debt-to-Income ratio?
Long term, the answer is “as low as you can get it.”
However, hard numbers are better tools for comparison. Take a look at the following DTI ranges:
- 35% or less = Good
- 36-43% = Acceptable but Needs Work
- 44% and up = Bad
If you’re trying to get a home loan, 36% is the most recommended debt-to-income ratio. If you don’t have a significant down payment saved up, 31% is a better target.
So how do you improve your Debt-to-Income Ratio?
Since the only factors determining your DIT is income and debt, this means that the only way to lower your debt-to-income-ratio is to pay down your debts or increase your income. Having an accurately calculated ratio will help you monitor your debts and give you a better understanding of how much debt you can afford to have. This is all easier said than done, though. Below are some creative strategies you can use to help improve your debt-to-income-ratio.
1. Pay off your loans ahead of schedule
While loans typically have a repayment plan, you do not have to stick to this. If your budget has room for extra payments, you could pay off your debt ahead of schedule. One way to tackle this would be to adopt the snowball method, which involves paying your smallest debt first and then working your way up to the biggest. Conversely, you could use the avalanche method which involves paying off the debt with the highest interest rate first while making minimum payments towards your other debts.
2. Refinance your debt with a new lender
If you are unable to pay off your loans or debt ahead of schedule, restructuring your debt may work for you. One option is to refinance if you qualify for a lower interest rate or can change your repayment terms. Pursuing refinancing may also allow you to lower your monthly payments which will also have a positive impact on your debt-to-income-ratio.
3. Use a balance transfer to lower interest rates
Shop around for zero interest credit cards that offer 0% APR for a promotional period. Transferring your debt to a credit card like this can help you tackle your debt quicker while you don’t have to worry about interest fees during the promotional period. Be careful with this method, though. If you don’t pay off your debt before the promotional period is up, your interest rate could skyrocket and you may be left paying more than you were before. This could have an adverse affect on your DTI.
4. Target debt with the highest bill-to-balance ratio
This strategy revolves around targeting the debt that will reduce your debt-to-income ratio the most using the least amount of cash. If you owe $200 on Card A that has a monthly payment of $40, and you owe $100 on Card B that has a monthly payment of $50, you would want to start by paying Card B because the monthly payment is 50% of your balance whereas Card A’s payment represents 20%. Using this method will have a higher impact on your DTI.
5. Negotiate a higher salary/find a side gig
As stated before, increasing income is one of the two ways to improve your DTI. If you are unable to do any of the above–or even if you are– increasing the amount of money you bring in will lower your debt-to-income ratio. Asking your employer for a raise can be a great turn of events you might not have expected positive results from. Finding a side gig can allow you to allocate all extra earnings to debt and help get it paid quicker.
Avoid employing short-term tricks to lower your ratio, such as getting a forbearance on your student loans or applying for too many store credit cards. These solutions are temporary and only delay repaying your current debts.
Need Help to Lower Your Debt-to-Income Ratio?
Your DTI is an important tool in determining your financial standing. If you’re struggling to come up with ways to lower your ratio or are looking for financial guidance, our expert coaches can help you. Contact us today to learn more about how Credit.org’s Debt Management Plans can help you take control of your debt payments.
by Madison Ervin | Oct 18, 2023 | Loans, Student Loans
It’s no secret that student loans are one of the top causes of debt in the United States. According to Forbes, there’s a total of $1.75 trillion in debt between federal and private student loans. Of that number, just more than 90% consists of federal student loans, and most college students owe some amount of debt.
Because of the overwhelming amount of student loan debt, many people ask themselves, “Is it worth refinancing my student loans?” This is especially true as the three-year hiatus on student loan payments has officially ended and payments and interest accrual have resumed.
If you’re considering refinancing your student loans but aren’t sure it’s the right decision, you’ve come to the right place. There are several things to consider when making this decision, such as the type of loan you have, your interest rates, and more.
This blog explains how to weigh the pros and cons of student loan refinancing to help you decide if it’s the right choice for you.
What Is Student Loan Refinancing?
While most people have heard the term “refinancing” thrown around from time to time, few people understand what it actually means. We’re here to break it down for you.
When you refinance your student loan or loans, it essentially means that you trade it in for a new debt.
In other words, you would apply for a new loan from a private lender that would pay off your existing loan. You would then make monthly loan payments to your new lender rather than the lender that originally gave you the loan.
While you still have to pay back your loans, student loan refinancing often results in a lower interest rate, flexible payment terms, and can reduce your monthly payment.
Is Student Loan Refinancing the Same as Loan Consolidation?
While refinancing and loan consolidation both involve combining your loans into one monthly payment, they’re not actually the same thing.
Student loan refinancing is available for both private and federal student loans and has the potential to lower your interest rate and reduce your monthly payments. Click here to get matched with student loan refinancing offers in less than 60 seconds.
Student loan consolidation, on the other hand, is only available for federal student loans and not for private ones. Although a federal direct consolidation loan combines your debts into a single payment, making it easier to monitor and repay, the interest rate and monthly payments aren’t necessarily lower. As such, consolidation is less likely to save you money than refinancing.
Pros of Refinancing Student Loans
Now that you have a better understanding of what loan refinancing is, let’s take a look at the advantages it offers.
Lower Interest Rates
One of the biggest advantages of student loan refinancing is that you can significantly lower your interest rate. So, by refinancing and reducing your interest rate, you can lower your monthly payments and total loan payment.
Streamlined Payments
Another big advantage of refinancing is that it takes all of your loans, federal and private, and streamlines them into a single monthly payment.
For example, let’s say you have each of the following loan types:
- Direct Subsidized
- Direct Unsubsidized
- Student PLUS
- Federal Perkins Loan
- Direct PLUS Loan
To top it off, you also had to take out a small private loan for student housing and other needs. As a result, you could be making anywhere from three to six different payments to different lenders, which can be difficult to track. If you refinance your student loans, you only have to make one payment to one lender. Seems more manageable, right?
Opportunity to Change Loan Terms
Student loans from federal and private entities often have very fixed repayment plans and terms. Private lenders that refinance student loans, however, are more flexible with their repayment plans.
With that being said, you can either extend the life of the loan balance and make lower monthly payments for longer, or you can shorten the loan and make aggressive payments for a shorter amount of time.
Improved Credit Score
Because of the difficulties involved with keeping track of your student loans and the high-interest rates they can carry, it can be easy to fall behind on your payments. Unfortunately, in addition to putting you deeper into debt, missed payments can negatively affect your credit score.
Since refinancing your student loans often results in lower interest rates, flexible monthly payments, and a single payment, it can be easier to stay on track and not miss payments. As such, refinancing your student loans can actually help improve your credit score rather than negatively impact it.
Cons of Refinancing Student Loans
On the other hand, there can be some disadvantages when it comes to refinancing your student loans, including the following.
Loss of Federal Loan Benefits
The biggest disadvantage of refinancing federal student loans is that you lose out on federal loan benefits you qualify for. Benefits for federal student loans include things such as student loan forgiveness, income-driven repayment plans, student loan repayment assistance, and loan deferment or forbearance.
If you qualify for student loan forgiveness or need any of these other benefits, it might not make sense to refinance your federal student loans. Plus, you won’t qualify for Public Service Loan Forgiveness (PSLF) if you refinance your federal loans.
However, these stipulations don’t apply to private student loans. You can refinance just your private loans and still receive benefits on your federal ones.
Credit Requirements
The second disadvantage of refinancing student loans is that not everyone can qualify. Most reputable private lenders require you to have a credit score of at least 650 to 670. So, if you don’t have a good credit score or any credit at all, refinancing might not be an option.
Potential for Higher Costs if Rates Rise
Finally, while many people save money through student loan refinancing lenders, there’s no guarantee that you will. For instance, if you already have a great fixed interest rate on your loan and refinancing could result in higher interest rates, there’s no reason to refinance.
Additionally, some companies that refinance student loans only offer variable rates. Unlike fixed rates, variable rate loans have interest rates that can change throughout the loan term, resulting in an interest rate increase or decrease. It’s important to understand that even though the initial rate might be lower, the rate can increase if you have a variable interest rate.
Steps to Refinance Your Student Loans
If you’ve weighed the pros and cons above and think it makes sense to refinance your student loans, here’s what you should do.
1. Research and Select a Credible Lender
The first step of any major student loan decision is to do some research and shop around for different student loan refinancing lenders. Because of how popular refinancing has become, there are dozens of options to choose from, which can be overwhelming and frustrating.
To make it easier to compare lenders, we’ve done the research and compiled a list of our trusted partners. Click here to get matched with student loan refinancing offers in less than 60 seconds, with APR rates starting from 1.88%. Credit & Debt gathers information about credible lenders for you and makes it easy to compare interest rates, monthly payments, and repayment plans. Plus, comparing pre-qualified rates is 100% free, with no impact to your credit score!
Using Credit & Debt for your student loan refinancing needs can save you time, money, and help reduce the stress of refinancing.
2. Gather the Necessary Documents
Once you’ve compared the plans and rates that various lenders offer and have chosen the right one, you can start gathering the documents and paperwork you’ll need to apply for refinancing.
While these vary from lender to lender, they usually include the following:
- Driver’s license, passport, or another form of government photo ID
- Your Social Security card or number
- Documents related to the student loans that you plan to refinance
- Documents showing proof of income
The reason that loan and income documents are so important is that your lender will want to check your debt-to-income ratio (DTI). Your DTI is the ratio of your debts to the amount of income you have. Ideally, you want as much income and as little debt as possible to qualify for refinancing and to get a good interest rate.
3. Complete the Application Process
If you have the necessary documentation and information, you can proceed to complete the application process. This includes filling out a loan application form and entering requested financial and personal information to the best of your ability.
After you complete the application, there’s a good chance that your lender will check your credit history. With that being said, you may want to check your credit score and ensure it is higher than 650 – this is usually the minimum score required by most lenders.
4. Review and Sign the Loan Agreement
If the lender reviews your application, finances, and credit score and approves your loan, you can review and sign the official loan agreement. This can all be done online through DocuSign or a similar platform and is usually a fast and smooth process.
5. Keep Track of the Progress
Keep in mind that there can be a short waiting period between when you sign the new loan agreement and when the refinance company actually pays off your current loans. In the meantime, keep track of the loan progress and continue making payments on your federal and private student loans until the refinancing plan kicks in.
Once your new lender pays off your student loans and transfers your debt, you receive a payoff letter from your old lender. Once this happens, you can stop making payments to them and start focusing on your new student loan payment to the refinancing company.
The Bottom Line About Student Loan Refinancing
Refinancing your student loans can be a great way to reduce your monthly payments, lower your interest rates, and get on a better repayment schedule. Since you can refinance federal loans as well as private student loan debt, it can be a good alternative to debt consolidation.
However, before opting to refinance, it’s important to make sure that you qualify for a lower interest rate, meet the necessary credit requirements, and don’t need access to federal loan benefits. You should do your research and shop around for the best refinancing option for you.
With no origination fees, no service fees, and no prepayment penalties, you can compare the best student loan refinance rates, all for free with Credit & Debt.
Credit & Debt does not provide debt relief or loans and is not a lender. A Credit & Debt coach will guide you through a free financial evaluation, help you understand your options and connect you with a qualified partner.
by Abigail Masterson | Feb 1, 2022 | Credit |
So it’s time to buy a home! Typically, you need a credit score of at least 620 to secure a loan from a qualified lender. This score illustrates you’re dependable enough to pay back any borrowed money on time. It is possible to still get a loan if you have a lower credit score, even one in the 500s. Continue reading to learn about all your options, and more!
Qualifying for a home loan
When you are qualifying for a mortgage, there are a few questions most lenders will ask. Things like, is your credit score good? Have you ever filed for bankruptcy, or can you explain any late payments or collections? And are your credit cards maxed out? Prepare ahead of time by first answering them yourself to determine your eligibility for a home loan.
Conventional mortgage loans
A conventional mortgage loan isn’t backed or guaranteed by the federal government. They can be a bit tougher to qualify for (a score above 740 will get you the best rate), but they fit a wider range of buyers and properties. Conventional mortgages are divided into two types of loans: conforming and nonconforming. Conforming loan guidelines are set by Fannie Mae and Freddie Mac, two government-sponsored enterprises that financially fuel the mortgage loan industry. Nonconforming loans are those made to borrowers who have poor credit scores, high amounts of debt, or recent bankruptcy. Because they’re a bit riskier, these typically have higher rates and insurance requirements.
Federal Housing Administration (FHA) loans
A Federal Housing Administration (FHA) loan is a mortgage insured by the Federal Housing Administration. They allow for down payments as low as 3.5% with a 580 credit score, so they’re helpful for buyers with lower credit scores and limited savings. They also have more flexible rules regarding gifts of down payments from family members, employers or charitable organizations, and in some cases, might have lower monthly mortgage insurance payments. You can obtain one of these loans at a bank, credit union or nonbank that is approved by the FHA.
Department of Veterans Affairs (VA) home loans
A VA loan is a mortgage issued by a private lender and guaranteed by the U.S. Department of Veterans Affairs. You must be a U.S. veteran, active-duty military personnel, or a surviving spouse to qualify for this type of loan. The program was created after World War II by the GI Bill of Rights to help veterans re-establish themselves after the war. Because of the VA’s guarantee, the government will repay the lender part of the VA Loan if the borrower cannot make payments. This makes borrowers less risky to lenders, and allows them to offer better terms and require no down payment. They also have limited closing costs (the various fees and expenses you pay to obtain a mortgage) to no more than 1% of the loan amount.
United States Department of Agriculture (USDA) loans
A USDA (United States Department of Agriculture) loan is available for rural homebuyers and is issued by the USDA Rural Development Guaranteed Housing Loan Program. There is zero down payment for the mortgage and they are divided into three loan programs:
- Loan Guarantees: The USDA will guarantee a mortgage issued by a qualified local lender and allows you to get lower mortgage interest rates, even with no down payment.
- Direct Loans: These are for very low income applicants. Income thresholds depend on the region and can have interest rates as little as 1%.
- Home Improvement Loans and Grants: These are loans or financial awards that allow homeowners to repair or upgrade their homes.
What to consider before applying for a home loan
So you’ve come this far in the article. Perhaps house-hunting is your next step. But, before you begin, we’ve got a few more tips for you. Start by understanding exactly how much you can afford to borrow from a lender. This will save you time and energy from potentially applying for loans you’ll just be turned down for. Keep reading to learn a couple more helpful hints.
Reduce your debt-to-income ratio
Debt-to-income ratio is the amount of your income going towards paying off your debt each month. If your ratio is more than 50%, that means you’re spending at least half of the money you make on your debt–which is too much! Here are some ways you can decrease your ratio:
- Pay off your loans ahead of time. Use either the debt avalanche strategy or debt snowball method, both tried-and-true ways of tackling debt to pay it back faster and efficiently.
- Negotiate a higher salary. We’re sure you deserve a promotion. Change your DTI by increasing your income and having more cash to pay off your debt.
- Get a side hustle. Another way to increase your income is by picking up extra work. It may make life a little more hectic, but it will help you eliminate debt faster.
Don’t open new lines of credit (hard inquiries)
When you open a new line of credit, this shows up on your credit report as a hard inquiry and can have a negative impact on your score. Essentially, you’re giving a lender or issuer permission to assess how likely you are to be able to pay back any money you borrow. If you need to check your credit score, do what is called a soft inquiry or soft pull. This won’t pull your credit report and is normally a free service provided by your credit card company. Avoid applying for several new credit cards within a short period of time as well. A good rule of thumb is this: only apply for one credit card every six months.
Prepare to provide proof of income and assets
The process of buying a home also includes showing proof of income and any assets you may have. Employed applicants can provide their W-2 form, while self-employed borrowers can use their 1040 tax returns. Mortgage lenders might also want to see recent pay stubs and/or a letter from your employer, especially if you’ve recently changed jobs.
You can provide proof of your assets by submitting an asset statement, or documentation of your net worth. There are different kinds of assets you’ll want to show: liquid, non-liquid, and gifts. Liquid assets are items you own that have a cash value, or are easily converted into cash. Non-liquid assets are things with value that don’t easily convert to cash, such as cars, jewelry, artwork, or self-owned businesses. And gift funds are any money you’ve received from a loved one that can be used towards a down payment or closing cost.
Talk to a financial coach to get a personalized action plan
If you’re feeling overwhelmed in this process, you’re not alone! Many people find buying a home complicated and confusing, whether it’s their first time or not. Seek out professional services at your bank or private financial consulting firm. They’ll help you come up with a plan specific to your needs, and take some of the pressure off!
