If you’re thinking of buying your first rental property, you probably think it’s a good idea to pay down some of your debt before you speak with either a Realtor or a lender.
After all, the bank isn’t going to want to lend you the money to buy a property if you have a lot of debt, right?
In many cases, it is actually more important to save your money for a down payment and closing costs.
Underwriters, who are the people who review your financial situation before approving a loan, often don’t care as much about the balance on your loans as they do the amount of your monthly payments. And unless the payments are on an installment loan– like on a car, or a student loan, odds are paying down the balance isn’t going to make that much of a difference in your monthly expenses.
See, underwriters know that you can bring the balance right back up on your credit card after closing. This, of course, would make it more difficult for you to make your payments.
Underwriters would rather see money sitting in your bank account.
Before you begin your search for a duplex, it’s a good idea to visit with a loan officer to determine exactly what the best strategy may be for your financial situation.