Good Debt Vs Bad Debt Before and After The Home Buying Process

                            Good Debt Vs Bad Debt Before And  After The Home buying Process

Whether you are buying a home in Framingham Ma or any other Metrowest town, it is important to know when to  and not to make purchases of any sufficient value. Unless you use cash, you should not make any large purchases during your home purchase. If you make a purchase and apply for a mortgage, you have to limit your spending, because banks will look at this unfavorably, unless you have an extra stash of cash.

Any large purchase can lower your credit score if you are using credit cards. Banks also want to make sure that they will get repaid the money they lend you for the home. Your agent should guide you to be wise with credit card usage up until your closing date to make sure the loan will be made to you for your home.

These are very important things to remember. The bank wants to lend money and make huge interest on your loan over 15-30 years, but if you make a mistake and abuse your credit situation, it will be tough for a bank to lend money to borrowers who are irresponsible during the process. That is a sign to them that their money may not be first on your list for repayment, which will scare them.

Good debt is leveraging bank money to profit from real estate investments. This way you can be lent money for an income property, and only have to raise 20-30%, and have a bank LTV 70-80% on almost any amount of a commercails purchase. Commercial banking is much more favorable anyway. A home isnt really an investment. It is a place to call home that you build equity over time. It is your home, not really an investment except over a long period of time, or paydown.

Commercial real estate is a way to create wealth by highly leveraging individuals and the banks money. There is no better way to use debt to leverage your investments. That is good debt. bad debt is using credit cards. Credit cards kill your credit , you pay huge monthly interest, and if you are late on payments you also get hit with a fee. (not to mention these fees stay on your record for 5-7 years)

It is important to know the difference between good and bad debt and stay away from high credit card usage, especially when applying and moving forward on a loan towards a home purchase. You can keep your credit in a great position by paying your bills on time, and keeping your credit card balances at 35% or lower of the total credit limit.

If you are a real estate investor, the profits are in commercial and it is a much faster way to generate wealth throiugh cashflow , equity and major bank leverage. You can also get real creative with different types of financing and creative options with sellers. Residential lending is not as flexible or profitable.

                           Good Debt VS Bad Debt Before And After The Home Buying Process