If you're overwhelmed with debt, there's still hope. Our automated software will help you resolve your debt and move forward.

Reply to a lawsuitSettle your debt

How to Buy a Home While You're In Debt

Written by Hannah Locklear
Last updated on May 13, 2026

Summary: You can buy a home while managing debt through FHA programs that cover down payments and closing costs, VA loans with no credit requirements for veterans, and investment property strategies that use rental income for qualification. Work with mortgage brokers who offer more solutions than banks, and consider using SoloSettle to settle existing debts first to strengthen your mortgage application.


Think debt disqualifies you from homeownership? Think again. Scott Griffin, a nationally recognized mortgage expert with over 25 years of experience, recently joined The Debt Hotline to shatter myths about buying a home while managing existing debt.

As the founder of Scott Griffin Financial and a regular CNBC contributor, Scott has helped thousands of borrowers navigate the mortgage process. His message is clear: 2025 is the "year of solution-based lending," and there are more opportunities than ever for people with debt to become homeowners.

SoloSettle
4.7 (635)

Settle your debt for a fraction of what you owe

SoloSettle negotiates directly with creditors — no lawyers, no fees upfront.

$2.5B+
Protected
~40%
Avg. Savings
3 min
To Start

"Well worth it. I could not have done this without assistance."

J
Jerry S. Verified
Make an Offer Now

No credit card required · Takes 3 minutes

Credit score requirements are lower than you think

One of the biggest misconceptions about homebuying is that you need perfect credit. Scott reveals the reality is much more encouraging:

  • FHA loans: Minimum credit scores as low as 580-620 for most borrowers
  • VA loans: No minimum credit score requirement for veterans
  • Conventional loans: Starting around 620, but varies by lender

He also explains:

"Every bank has their own risk comfort. While most lenders require a 620 credit score, some investors are willing to go as low as 540. For veterans, the news is even better: VA loans have no minimum credit score requirement because they're designed as a benefit, not just a loan product.”

The key is shopping around and working with professionals who understand the full range of available programs rather than accepting the first "no" you receive.

FHA programs can cover your entire down payment and closing costs

Scott's most exciting revelation involves the FHA 100 program, which addresses the biggest barrier to homeownership: upfront costs.

This little-known program allows qualified consumers to:

  • Get their home regardless of down payment (the program provides it)
  • Have sellers cover all closing costs
  • Purchase with credit scores as low as 600
  • Buy duplex properties to generate rental income

"You can literally buy a house today in your community for less than a thousand dollars out of pocket. I bet before this conversation started you didn't know that."

This program is available through select lenders and represents FHA's commitment to making homeownership accessible. Scott notes that FHA is "the government's way of spelling yes, "providing federal insurance that gives lenders confidence to approve loans for borrowers who might not qualify elsewhere.

Savings Calculator

How much could you save each month?

Your total debt
$10,000
$3,000 $50,000
Credit card payments
$287
/month
at 24.99% APR
for 5+ years
With SoloSettle
$172
/month
settle for less
resolve in months
You save $115 /month
Make an Offer Now

Credit card payment estimated at 24.99% APR over 60 months. Settlement estimate based on industry averages. Actual results vary.

Investment properties work even with existing debt

Contrary to popular belief, having debt doesn't prevent you from buying investment properties. In fact, Scott argues it might be exactly what you need to build wealth and manage your existing obligations.

When evaluating investment property loans, lenders ask a different question. Instead of "Will you pay me back?" they ask the building: "Will the rental income cover the mortgage payments?"

Here's how investment property qualification works differently:

  • Income requirements: If market rents cover the entire mortgage payment, your personal income matters less
  • Debt evaluation: Your existing debt becomes secondary to the property's cash flow potential
  • Wealth building: Real estate equity can grow faster than your ability to pay off credit card debt
  • Tax benefits: Investment properties often provide deductions that improve your overall financial picture

Scott shares his personal experience: "Our family, because I purchased those properties, we could retire" based on the equity built over time. The key is finding properties that cash flow positively from day one.

Mortgage brokers offer more solutions than banks

One of Scott's strongest recommendations is working with mortgage brokers rather than direct bank lenders. The difference can be significant:

Why mortgage brokers are better for complex situations:

  • More options: Represent multiple lenders instead of just one bank's products
  • Fiduciary duty: Legally required to act in your best interest
  • Specialized programs: Access to solutions like FHA 100 that banks don't offer
  • Education focus: Spend time explaining options rather than just processing applications
  • Same compensation: Paid the same regardless of which loan type you choose

"Bank of America doesn't have this solution. Wells Fargo doesn't even represent, they don't have them," Scott explains. "You need to go to your mortgage broker because your mortgage broker represents the large banks, medium banks, and small banks."

Taking advantage of today's market conditions

Scott emphasizes that 2025 presents a unique opportunity for homebuyers. Many markets are shifting from seller's markets to buyer's markets, creating opportunities for:

  • Seller concessions: Sellers willing to help with closing costs
  • Negotiation power: Buyers can make demands they couldn't in previous years
  • Better terms: More flexibility in purchase agreements

"This window is going to be a short-lived one, but we're in one now," Scott notes. The combination of new lending programs and improved market conditions creates optimal timing for debt-challenged buyers.

Real buyer scenarios and solutions

Scott addressed several real listener questions that demonstrate how debt doesn't have to derail homeownership dreams:

Credit card debt and investment properties

When asked about buying a second home with $30,000 in credit card debt, Scott's response was enthusiastic: A hundred percent, it's possible. He suggests the rental income could help pay down existing debt while building wealth through real estate equity.

Medical debt and past late payments

For someone with a 620 credit score due to medical debt and old late payments, Scott's message was clear: "Look at you with your 620 fancy." Medical debt often doesn't count against mortgage applications, and two-year-old late payments have minimal impact.

Charge-off debt strategies

Rather than just paying off charged-off accounts, Scott recommends negotiating with creditors for complete removal from credit reports. "People are often motivated to participate in your success when you participate in theirs," he explains.

How to tap into your existing home's equity

For current homeowners with debt, Scott reveals strategies for using home equity to solve multiple problems:

  • Home equity lines of credit: Access cash for investment property down payments
  • Debt consolidation: Move high-interest credit card debt to lower-rate mortgage debt
  • Tax advantages: Mortgage interest is often tax-deductible while credit card interest isn't

Scott shares how his family used this strategy: "I tapped into the equity in my Los Angeles home and I transported that to Palm Springs and we bought three properties in total out there."

Why the mortgage is the biggest debt you'll ever take on

Scott reminds listeners that mortgages represent the largest debt most people will carry, but it's also the most productive debt. Unlike credit cards or personal loans, mortgages:

  • Build equity over time
  • Provide tax benefits
  • Appreciate in value
  • Generate rental income (for investment properties)
  • Establish stable housing costs

Scott emphasizes:

"If you pay rent, you can pay a house payment. The monthly payment difference is often minimal, but the wealth-building potential is substantial.”

Taking action despite uncertainty

Throughout the conversation, Scott's message remained consistent: don't let debt prevent you from exploring homeownership. His advice for anyone considering buying a home while managing debt:

  • Get educated: Understand what programs are available
  • Shop around: Different lenders have different risk tolerances
  • Think long-term: Real estate builds wealth over time
  • Act now: Market conditions and programs won't last forever

"Just believe you can be a homeowner," Scott concludes. With the right knowledge and professional guidance, debt doesn't have to derail the American dream of homeownership.

Ready to explore your options?

Whether you're dealing with credit card debt, medical bills, or other financial challenges, homeownership might be more accessible than you think. The key is understanding what programs are available and working with professionals who specialize in finding solutions rather than creating obstacles.

If you're carrying debt that's impacting your credit score or debt-to-income ratio, consider settling it before applying for a mortgage. Solo can help you negotiate with creditors to reduce your debt burden, potentially improving your mortgage prospects and saving you thousands.

Settle your debt for less with SoloSettle.

For California residents, Scott Griffin can be reached at 818-20-SCOTT or scottgriffin.com. For borrowers in other states, he recommends finding a local mortgage broker who understands the full range of available programs and can guide you through the process of turning your homeownership dreams into reality.

Transcript

Hannah (00:36):

Hey everybody, thank you so much for joining the Debt Hotline. My name is Hannah with Team Solo and I'm super excited to welcome our special guest today, Scott Griffin. Scott is a mortgage broker based out of California and I wanted to take a minute to read his biography and then give you a minute, Scott to introduce yourself and tell us a little bit more cover anything that I missed. So Scott Griffin is a licensed real estate broker and he's nationally recognized as a mortgage expert with over 25 years of experience in the housing and lending industries. As the founder of Scott Griffin Financial, he specializes in helping self-employed individuals, entertainment professionals, and everyday borrowers, secure, smart, sustainable home loans. Scott has advised Congress on housing and lending reform and three of his recommendations were signed into law. He holds multiple credentials and he has received official recognition from both Congress and industry peers for his consumer advocacy and professional excellence. He has a passion for helping people become homeowners, not just mortgage holders, and he brings a wealth of experience and heart to every conversation that he has. So we're super excited to have Scott on tonight. Scott, can you tell us, and before we started, you also mentioned that you are also on national TV often, so tell us, did I miss anything? Is there

Scott (01:58):

Any What's so fun? Isn't it fun to hear a little bit back about some of the history you're living in life and everything you said is awesome. So here I am in the world of mortgage lending, finding a space to help consumers. We were visiting earlier, I don't ever remember growing up where they taught us how to buy and finance real estate. We're just thrown out in the world and asked to figure it out on the ride. And I was fortunate enough to get invited into the of industry. Well, it was back in 1997. My goodness. Well, it's amazing what's possible once you go deep inside of the understandings of what it is to become a successful mortgage borrower, then all of a sudden the world of yes you can is more available. And so it's that spirit that helps me to keep the energy so alive when I'm working with consumers and their real estate partners to get them into the homes they fall in love with and even being the state president for California's lending.

And yes, you're right Hannah. I even got invited to be a national television host on CNBC. I've been on the networks now for seven years and we just finished. He a super special, special heartfelt project and here in Los Angeles where I'm based, we just got through, well most of us know about the fires that affected the Palisades, the Eaton fires, the biggest devastation of fire in our nation happened here in our city and there are so many stories that were affected by those fires. I thought it was super important to go out there while life was fresh and find some of those stories. And we sure did. And I just got done watching the show's finished production. But what I love about it is that I've watched it now a total of six times and I was sharing earlier that I thought for sure after the fourth I would stop crying. No, gosh, all the way through each episode I kept crying to watch it again. It's a powerful, powerful thing to see what happens and who comes together when life gets that disturbing, that show segment focuses on that.

Hannah (04:12):

Wow, that's super inspiring. I'm excited to watch the episode. And you mentioned that you helped produce it, right?

Scott (04:19):

Isn't that fun? The first time ever I've been on the networks and I'm usually a seven minute section of an entire show. This one was in fact the entire show focused on just this. It's super terrific tune in for those local here in LA and those not well, we'll be streaming it online scott griffin.com. Yeah, so that's really fun, Hannah, thanks for highlighting that. And you know what I love, thank you for putting together this awesome podcast and educating those to get knowledge so they can be successful too. Why? You know what I love about 2025, I've discovered this is the year of solution based lending.

This is the year of solutions that are created to speak to self-employed individuals here in my local LA community. This is the playground for the entrepreneur. This is where Hollywood happens and often they work from project to project show to show, commercial to commercial, movie to movie. These are not full-time 40 hour work weeks. This is a different industry. It takes a different spirit to find that level of joy and that type of moment of work and this city's filled of that. And so it's nice to see they can access. Yes as well. I'm so tickled to see what we get to talk about today. Thanks for organizing this.

Hannah (05:49):

Of course. Thank you Scott for being our guest. With your expertise in the mortgage industry and the home buying industry, I think that we're going to be able to learn a lot together and hopefully try to put a little spin on debt because on the debt hotline we do focus typically on debt topics. And so for today's topics,

Scott (06:12):

Well I think the mortgage is probably the largest debt we'll ever take on in our life.

Hannah (06:17):

Yeah, a mortgage is the biggest debt you'll ever take on, right? And it's also one of the most important because it's your home and it's where you spend most of your time. And so it's a really important type of debt. And tonight's topic in particular is how can you go about buying a home while you are facing debt?

Scott (06:37):

I love the question.

Hannah (06:38):

If you ever have questions about debt, you can call into the debt hotline at 6 1 3 8 1 8 1. You can ask questions, leave a voicemail and we will respond to our questions weekly in our podcast. So please go ahead and give us a call, submit your questions. I did want to ask you, Scott, a few preliminary questions about buying a home while facing debt. Can you tell us, some of these get maybe more into the legal realm, so if you're not sure, no worries. But I was curious if you have any idea typically what the minimum credit score would be to qualify for a home loan?

Scott (07:17):

I do. And may I please. This is fun. At the end of the day, we're just individuals. And even as a company, we're individual companies. Banks are individual banks from each other. I say all of this on purpose. Here's what I've discovered. Every bank has their own risk comfort. You and I might call it their risk tolerance. And that matters for you and I as a consumer what debt? Why? Because most lenders are going to answer the question by asking you to have a six 20 credit score. But wouldn't you have loved to have met the other bank that was willing to say hi at 540? Well sure if you had a five 50 score, you would have. So I want you to know the general answer to the question of minimum credit scores to play with the loans you most want to apply for six 20 for FHA for most borrowers, five 80 end up. But there are investors that exist that are willing to go lower. And if you are a vet that has served and you have your VA benefit, guess what your minimum credit score is. Did you say nothing? That's correct. There is no minimum credit score for a vet. None whatsoever.

Hannah (08:33):

I love that.

Scott (08:33):

Well, it's a benefit, not the same as a loan. Vets are designed to receive their benefit. They worked really hard to receive and it's designed to be provided for them.

Hannah (08:43):

Yes, thank you vets for your service, all you vets out there. So I think that's a really important thing to highlight, that there's this often misconception that you have to have this incredible high credit score in order to qualify for a loan, but that's not necessarily the case. There are different programs, especially if you're a veteran, there are other programs in place that can help you access the ability to buy a home if you're not in the best credit.

Scott (09:08):

So you know what I love about F-H-A-F-H-A is the government's way of spelling. Yes. They spell yes by FHA. They're an actual mortgage insurance program that ensures the lender against risk. But FHA is a federally insured program and ensures the risk for the lender with even more benefit. Usually mortgage insurance only provides benefit for the lender in case of a processed foreclosure. FHAs insurance kicks in just when we as a consumer start missing our monthly payments. So FHA provides insurance to the lender. And so when you're covered on a federal level for a lender, how do you say no to them guaranteeing, I'm going to get my money here. Here's your chance. So what you said is so real and you know what else I love about the FHA spirit of Yes.

When it comes to traditional conventional conforming loans that we get through Fannie Mae or Freddie Mac, most consumers borrow through those channels in America. Well, that one has a credit score sensitivity. And each 20 point bucket we fall in right from six 20 to 6 40, 6 40 to 6 60 20 point buckets means something different for us of what we're going to pay primarily for those that adopt mortgage insurance are going to pay more for the insurance we get with lower credit scores significantly more unless we get an FHA loan. Why? Because FHA, everybody pays the same. And so it's less sensitive for everybody that fits a particular profile. Everybody in that profile pays the same. But in private mortgage insurance, it's just what it sounds like. It's privately insured and every insurance company has their own risk profiles and everybody is scored differently. Federal insurance works the same in every zip code. And so you know what else is super cool? Hannah? You know what else is super, super, super, super cool about pay.

Hannah (11:18):

Tell me.

Scott (11:19):

What if I told you what if I said that you consumer listening to us right now who might still be renting Hannah? I think most of us rent longer than we should because it costs a lot to come up with down payment and closing costs. It's much cheaper to come up with one month security deposit to become a renter longer than it is to step into a new home purchase. For most of us, I think is why we're still renting is because of the dollars we don't have because it's hard to save that amount of money and live life normally and especially if we have debt to manage. So how do you even see yourself as a homeowner? I bet you don't even visualize it. Well, I think that's because nobody told you about the FHA 100 program. What's that? Well, that's the FHAs program selected at just a few lenders that have access for it and it invites a qualified consumer to get their home regardless of down payment.

The program provides it. And Hannah, it does more than just that. It invites the seller to cover all of the closing costs, inviting a consumer with a credit score as low as 600 to get their very first home. And it even includes the ability to buy a two unit duplex. You know what I've learned, Hannah? If you're living in debt and you work hard and you have qualified income, but it's not bold enough to buy in your community, well guess what? Don't buy a loan. Go buy a duplex. Allow the rents that you collect as a landlord to supplement the income you earn from your company, blending them both together and that's you getting out of the rental. And you can literally buy a house today in your community for less than a thousand dollars out of pocket. I don't even know if you can rent an apartment for less than a thousand dollars out of pocket, but I'll tell you what, you can buy a house and I bet before this conversation started you didn't know that.

Why? Well, because they never taught us growing up and these solutions are constantly being developed to speak to consumers. We know that the market deserves a mix of different type of consumer types. A market can not only have one flavor, you can't only sell homes to people with 30% down. No, everybody needs a chance at home ownership and our market is designed to provide it. But what I love Hannah, is that it's provided to those that qualify to make their on-time monthly payments. It's amazing. One might think because I didn't put down a large down payment that those are most likely the first loans to go into foreclosure. No. We were able to measure what happened in the oh eight markets and we still constantly measure mortgages and the result of on-time payment. Do you know what determines on-time payment? It's your income, it's your employment against your debt being measured correctly. That's a better demonstration than what was your down payment. The best performing loan in all America is a VA loan. And what has that commonality zero down. So it's not the down payment that determines ability, it's your commitment to the commitments you make in life and the tools you use to get you there.

So I just say it out loud because I know the topic is about debt. And I think for those of us that are in debt, we just don't see ourselves as anything other than the people in debt. And I think life is designed to get us into debt and to keep us into debt for as long as they can because debt is very profitable for them, whoever they are.

Hannah (15:01):

Yes, and I love that there are programs out there like the FHA loan that make it possible for people to live the American dream, to own a home and maybe to even invest in real estate. And it's comforting to know that you don't have to be this high profile super rich person in order to access that.

Scott (15:20):

Isn't that delicious? Isn't that great that you can too? Why? Because yes, you can. Here's how to do it. You reach out to your trusted local mortgage broker, not your bank. Bank of America doesn't have this solution. Wells Fargo doesn't even represent, they don't have them. You need to go to your mortgage broker because your mortgage broker represents the large banks, medium banks, small banks. They represent solutions you can't find without their assistance because they are the channel where solutions are brought through. If you're in California, I'd love to say hi. If you're out of California, Google is your friend and we're googling your mortgage broker in your local community. They're your best resources to access the solutions we're talking about. They're available today.

Hannah (16:16):

Love it. And like Scott said, if you're in California, you can reach out to him. Scott, what's the best way to reach out to you?

Scott (16:22):

Okay, way back in 1997, I thought it'd be cute to get a phone number That's eight one eight. So here in the valley, 8 1 8 is a popular area code. And then I got the phone number 20 Scott, eight one eight twenty. Scott say, easy number, had it ever since. So 8, 8 20. Scott either.com or just on your phone and we'll say hi and we'll discover the FHA 100 is only one path to yes, 2025 has solutions plural. It's a delicious world to get out of your rental and to be a homeowner. And you know what else, Hannah? You know what I love about the time of today that we're meeting, it's a very unusual window in the real estate market for most of us in every zip code, we've been so exposed to a seller's market where the seller's controlled yes and no for many communities. Even here in Los Angeles, we're turning more towards a buyer's market where a buyer has an opportunity for seller conversations.

Negotiations and seller's participation and seller provided concessions that empower us to be their home buyer. That was not possible just a blink or two ago. This window is going to be a short-lived one, but we're in one now. And for those listening to us right now in your local markets, reach out. See what's possible. It's amazing what's possible once you're aware of something. But if you're not aware of it, you'll never look for it. Please use this moment of hearing us now. Go have fun. It's the summer of 25. See what's possible in your neighborhood and see if you can't get one for yourself. I have a feeling that probably you can, if you pay rent, you can pay a house.

Hannah (18:09):

You're inspiring me right now, Scott.

Scott (18:11):

It's the truth. Hannah. It's the truth.

Hannah (18:13):

I'm renting. I have a small family. I've got one daughter and another on the way and you're inspiring me right now. I might just call a mortgage broker right after this call, see if you know anyone, you can refer them to me.

Scott (18:26):

Oh, in Austin, I sure do. I absolutely do. Somebody you'll love. Scotty Campbell will just love to connect you. He’s an amazing man. So it's a beautiful Scots in the world. That's a Scotty.

Hannah (18:37):

Every Scott I've ever met has been a great person. So we've got a question from William submitted to the debt hotline. It says, when it comes to improving your odds for getting approved for a mortgage, is it better to pay down existing open revolving credit card debt or closed charged off debt?

Scott (18:55):

Oh, that's a great question. Okay, so not only didn't they not teach us how to borrow money in school, they surely didn't teach us the algorithms to credit score models.

Here's the bizarre part, okay? You would think that paying off all of your credit card debt would make the magic of the scores to go up. Oddly enough, sometimes leaving debt does very good for your credit score. Sometimes paying all of it off can be damaging, not damaging, but it is. If you're trying to go to a higher scoring, you didn't get it because you've paid everything off. The algorithm constantly is updated with changes. You see another cool thing about what happens when you work with your local mortgage broker versus a mortgage bank. I think of a bank of somebody that you go in and you're like, I'm opening up my checking account. They're filling out their forms. They're not really educating as much as they're processing. So banks, I would suggest process the idea of your finance where a mortgage broker is focused differently on your success.

In fact, they owe you a fiduciary. A bank does not. So already kind of how it's set up and how you'll get educated. So what you'll learn is that they can run what they call a credit rescore in the background and they're going to be able to give you a recipe that's very specific to you as an individual. Here's what I've learned. The algorithm's very individualized because not only does it look at that, but is looking to see if we have how many accounts we have, when were they established, how old are they paying off a charged off credit debt may not give you benefit the same as playing with one of your active accounts. Also, maybe if you have a charged off debt, you might have an invitation, William to reach out to the credit provider that charged it off and them an exchange of some dollars for their reward of removing it entirely from your credit report. You would actually be incredibly benefited if the charge off was completely removed. You would think that a paid charge off would improve my credit score.

The credit score is simply raw data run through an algorithm at the time somebody pressed enter. Why do I say that? Because raw data is always changing, but a charged off account, whether open or paid off, separates us from a consumer that has no charged off accounts and the credit score is a three digit number trying to answer the master question, will you pay me back? So the three digit number looks at the raw data. So a charged off paid or just an open charged off still said that we were not able to bring ourselves to the whole partnership of that without an, I don't want to use the word incident, but it's kind of an incident. It's a charge off. And so you are a different risk factor whether it's paid for or open. So if you can get it removed in its entirety, you're going to be better benefited. William, I've learned that people are often motivated to participate in your success when you participate in theirs. And what's theirs? Getting some money. Remember before the call of offering they were getting no money, so their charge off didn't get them any money at all, but their willingness to remove it from your credit report will.

So that's my answer

Hannah (22:22):

And I have a little follow up to that, Scott, if you're looking to pay off a charged off debt, I agree with what Scott said. It could be in your best interest to contact the creditor and just see what they would do to work with you. See if maybe they would take a settled amount or a lump sum payment of maybe half of the debt that you owe. And at SOLO we can actually help connect you with collectors and creditors and law firms to negotiate and settle your debt for less and save thousands. We've had people use our platform to negotiate and settle in as little as two days.

Scott (23:00):

Wow.

Hannah (23:01):

And doing something like that could definitely, I think get you on a better track to home ownership. So yeah, check us out SoloSuit.com if you're interested in trying to pay off a charged off debt to improve your credit and you're trying to get on that path.

Scott (23:14):

Excellent question.

Hannah (23:15):

Yeah, William actually sent in another question. I'm going to go over that one next. It says, is it possible credit-wise to take over someone's existing mortgage to keep their low interest rate?

Scott (23:28):

Oh, William, why do you have the fun questions? I love these. You know what? Yes is the right answer. Allow me and I'll tell you what, William, even beyond, yes, as a great answer. It's a great strategy. So please, Hannah, there are homeowners out, there are home sellers that purchased their homes way back in the sexy years when the interest rates were in the twos and threes. Well, for most of those homeowners when they sell their house, the loan goes away unless they were a VA or more traditionally an FHA. So I'll focus right now on the FHA solution and the FHA solution is more prominent in America. You're going to find a lot of that out there. And what's super cool about that, remember what FHA, the government's way of spelling? Yes. So what good is a solution if nobody can have it? But the FHA is designed to allow you to qualify if you can qualify for your on-time monthly payments.

Interesting though. So when you take over somebody else's existing mortgage, you're going to qualify not with your mortgage broker. You're going to qualify with the existing mortgage loan servicer that services that loan with the homeowner. So in that moment, when you find that golden needle in the haystack and you're able to buy a house with an existing rate of two and a half, they're out there. A lot of them, we just got to find somebody willing to sell one. But if they are, and you can get it, a low credit score will still let you qualify. It's FHA, you just got to qualify for the FHA and so you'll go through their qualifying process and that's you getting that house. Now what's interesting about that is you're going to need to make up the difference in the down payment, right? Because one of the gifts of FHA is buying a home with three and a half percent, but that seller might need more than that from you for you to allow to take over theirs because they're selling the whole house, not just their mortgage debt. So I think that's my best answer to that question. The answer is yes.

Hannah (25:41):

Awesome. Well thank you for offering your insight. We're going to move on to the next question, which is from Greg in Ohio, it says, I'm about $30,000 in credit card debt, but my income is solid and I've never missed a mortgage payment. Is it even possible to qualify for a second home or investment property in this situation?

Scott (26:03):

Greg, now look at you. Are you friends with William knowing questions to ask? Okay. You know what I love about your question, Greg? It stays in the spirit of yes. And remember, this is the year of solutions. What good is the solution? If it's not saying yes, allow me. Okay? One of the things I'm in love with, we all played the game monopoly when we grew up. We know who wins the game. It's the one that bought the real estate, but it's not just those folks. It's the one that built the houses and if you got to build hotels on your land, forget about it. The game's almost over and that's how you win. And they were wealthy. Well, in real life, it's weird that it works. Kind of the same real estate develops wealth and the more you own it, the more wealth you develop because of it and through it, investment properties are how most of us build most of the wealth we develop through real estate.

Do you know what I love about what happens differently when we're investors? When you think about it, when we're an investor buying an investment property, we just became a business owner and the business we're running now is landlording and now we're self-employed landlords. And what's super cool about an investment purchase versus a home you're going to live in is that here all lenders, I don't care what their brand is, have one master question. Here it is. Will you pay me back? They all have the exact same master question. I have to ask you a bunch of questions to get to that one. When it comes to rental properties you don't live in, but you run a business through, I still have to ask the question, but now Hannah, check this out. I don't ask you the buyer. The question though, when you're a buyer buying a house you're going to live in, I have to ask you the buyer, the question, will you pay me back?

But on a rental property, I still ask the question, but I ask the building the question and here's how I ask the building the question. What are the current rents you are getting from the tenants that rent from you right now, if you're buying a building that's an investment purchase with no tenants, then we're going to ask the appraiser in the assignment to tell me what the market's rents are. Here's the cool part, Greg. If the market rents or the rents that are existing cover the entire cost of the mortgage payment, guess who gets to leave income and employment blank on the loan application? I won't care what your debt is, I won't care what your income is. Why? Because the building already answered the master question of will you pay me back? Remember the lender who's lending you money for your investment purchase is only lending you money on that purchase, not the house you live in. But because you make on-time payments and never miss anything, there's a really good chance you would qualify to be very successful as an investor buying your very first investment property regardless of your debt stature. As long as the building you're purchasing covers the debt surface, that's you running away with a whole bunch of Yes I did.

Hannah (29:28):

So do you think though in Greg's case particularly that it's smart to enter into a mortgage loan when you are facing other open debts In his situation, he's got $30,000, do you

Scott (29:42):

Think? Yeah, a hundred percent. You know why?

Hannah (29:44):

Why?

Scott (29:45):

Okay. You can't build wealth and start developing it if you don't take the actions that invited in. $30,000 has a monthly payment. Remember what I just said and if you heard me everybody, I said this, I said that if the rents that you collect are enough to cover all of the debt service, you can have the home. Why? Because buying this house, Greg should not cost you $1 extra per month and it does of you not owning the house. So for you not owning the house and only focus on your 30 grand debt, that's the wealth you did not develop my friend. Go get your house, go develop wealth, find a property that cash flows nicely. 30,000 is a blip on the screen of life. I'd love you to find a house for 30,000. I don't think it's out there. And if it is, I don't know if I'd buy it.

So I think your debt is much smaller than the investment ahead of you. So I think everybody's risk tolerance looks different for my family and I, we own three rentals on top of our house. I got to share with you each home that we purchased, I owned rental properties before the mortgage collapse where I lost everything and they did not work a blip in history. History tells us real estate wins until you have a mortgage meltdown of oh eight. It was a different market, very unique to that era, not a normal market one we'll most likely not. See again, however, in today's market, our family, because I purchased those properties, Greg, and we all have different tools at different times and it's uncomfortable doing something we didn't do just yesterday. So most of us don't. But those that are willing to do do things that others don't get, and wealth is one of those.

Most of us don't obtain the amount we have the right to access. Debt can be very powerful when used correctly. Debt leveraged against the house is one of those moments. What's so cool is that buying a home, the minimum down payment for most of us like using FHAs, it's like three and a half percent, but the growth that you build by owning it is called equity. Like the value of the house gets even more expensive some days tomorrow. It keeps expanding. You get to get privileged by the entire value of the home, not just the three and a half percent that you originally invested. There is nothing else out there that I'm aware of that lets you leverage in that method just real estate. And that's not to mention all the tax deductions you, you might find tax strategies, Greg, that empower you to pay that 30 K debt back better because now you get more of your earned income from your employer because now you have more tax deductibility strategies that invite more cashflow that you didn't have without your rental property. Everybody's different. All I can suggest you is dream bold, believe in the dreams you're creating, find those advisors in your life that will guide you through authentic guidance and that's you doing things you didn't know you could let rental properties be one of them. I think this window right now is amazing that my family can sell the ones that we purchased. And I'm 58. I've looked at the value of the real estate we own versus what it would sell for. We could retire.

I couldn't retire if I wouldn't have cut into the uncomfortable mode of adopting something I wasn't responsible for the month before and I wouldn't have done that just staying on my nine to five job. How do I do it? I bought at a different price point than what that real estate is worth now and it's significantly different

And it wouldn't be available if I didn't say yes the first time. I think that's my best answer. I'm not scared of $30,000 in debt. Yes, I bet it doesn't feel good. It's all relative to the income you earn. I'm going to assume in your question that even though the debt's present, you're able to pay all of your bills. You don't mention any words of having excess in your life. So I don't know where the down payment comes from unless we tap into your delicious equity in the house you live in. So for many Americans throughout have equity in the houses we own. Why? Because property value, since COVID has shot out of the roof for most zip codes inside of America and the value of today versus what we bought it for is the equity itself. Equity is usable when a bank gives us a line of credit.

That's one method of tapping into your equity without selling Greg, I don't know. For our family we did that. I tapped into the equity in my Los Angeles home and I transported that to Palm Springs and we bought three properties in total out there. One we keep. So we transported equity. Greg, maybe your home has equity, maybe it has enough equity. You ready for this Greg who's ready for fun? Maybe maybe your home has enough equity that not only does it give you the liquidity to create a down payment to buy your investment property, but maybe it gives you enough dollars to pay off that 30 K in credit card debt my friend, and pulls you out of 29% interest rate and puts you into six and seven and allows it to be a tax deductible event because it's tied to real estate now instead of leaving it where it's sitting in credit card debt. These are just crazy things that come to mind when you allow me to paintbrush together with you. And that's what you get to do with your local mortgage broker professional. They're going to think outside of the box.

Hannah (35:27):

Yes.

Scott (35:29):

They're not a bank. They have no money to lend you. They're always going to get paid the exact same amount no matter what type you qualify for. So you never need worry that they're going to stare you for their benefit. A broker's different and they're to your better benefit. And I say it out loud, these are those classes they never taught us.

Hannah (35:47):

Yeah. So it sounds like in Greg's situation, if he could buy a second property and use that rental payment to pay off some of that credit card debt, that could be one way to

Scott (36:00):

That's a good point.

Hannah (36:01):

Manage it, right? And then you also,

Scott (36:03):

Not to say the rents are that good. A hundred percent. A hundred percent

Hannah (36:06):

Yes. Well, yeah. I think the point is that there are options and I really love that as a mortgage broker you can kind of get creative with things and like you said, tapping into the equity of Greg's current home and seeing what options are available there. Credit card debt doesn't mean that there's no path to investment properties or home ownership like we've mentioned before. So this one was submitted from Amy in Florida. It says my credit score is around six 20 due to medical debt and some late payments from two years ago. I've been paying on time for a while now. Can I still get a mortgage or will I be laughed out of the bank?

Scott (36:43):

Amy? Oh my god, I love these questions tonight are awesome. My remember, you can already tell I love the word yes. So let's just stay there. Let's leave it. Not at all. Remember Amy, what is the minimum credit score for FHA five 80 and for many lenders, six 20 is the minimum. Look at you with your six 20 fancy. Well, six 20 fancy. And you know what I love it happened to you two years ago. You know what else I love Amy? It's medical debt. Well guess how much medical debt the lenders are going to ask you to pay back. Probably none. And so I have a funny feeling nobody's laughing at you. My Amy instead, look at you showing up and there's the red carpet. Come sit right over here. My new homeowner. Don't you dare be scared. You qualify for FHA 100 Amy. You won't even need a down payment. Somebody's there to help you to have your home that you qualify to make your on-time monthly payments for whatever that means for you. Amy, there's an absolute yes. I do not dare want you to be nervous about your six 20 score. Nobody's laughing. I just think they're hugging and then handing over keys.

Hannah (38:03):

I love that. So this is from Lala. It says, hello. How do you handle the increase in PMI and taxes? Can you tell us what PMI stands for?

Scott (38:12):

Yes. Private mortgage insurance and Layla. Okay, so property taxes. Property taxes are unique to the communities we purchase real estate in. That is going to be a harder question to answer because for most of us, our tax structure is different than our neighbor in a different county might have. So it is based on the different things that are voted in different bonds and different things that communities might've said yes to a new park for that another community may not have. Some states raise taxes based on your increased property values. Layla here in California where I practice real estate, there was a protective measure that passed the law years ago called Proposition 13 and what it did for California homeowners because our property values rise differently than most of America. And if you are a person that bought your home years ago and it is value today, now in the millions and you bought under a hundred, well how are you going to afford the property tax on the millions?

You are on the budget for the a hundred. So in California our property taxes are based on our purchase price and they don't go up annually unless they went up for everybody. I know where you unique that way they tax us other ways as you can imagine. So to lower your taxes, I would say a couple of ways. There are people in your local community that you can Google that focus on challenging with your tax assessor, your property tax bill amount. And then if they're successful, you pay a percentage of whatever they were able to negotiate lower for you if you want to take it on. Well, you know what I've learned, okay, here's what I've learned. Sometimes it's easy just to pick up the phone and just ask the question of where did they come up with the new value that you don't believe that the value of their computing your taxes on is accurate to the value of what your home is worth and that you'd like to discuss a reevaluation of value that's just you calling.

But I have a feeling if you do have somebody that focuses on how to do it, they'll be better at it. Why? Because they had the conversations. They know how much movement is PMI? Private mortgage insurance. Okay, private mortgage insurance, everybody pays a different premium because everybody's risk profile is unique to them. So I'll start off that way. Every bank that you get your mortgage that has you capture PMI, you're going to pay a different premium. Why? Because private mortgage insurance is based on the foreclosures, based on the loans the underwriting took place at the bank, the loan was given to you as if that bank has more foreclosures than other banks, then their insurance premiums for their consumers will cost more because it says that their bank does not underwrite the same level as this bank. So every bank's PMI, price that you pay will be different.

It is not the same everywhere by any means of the word. So those are the other things they didn't teach us. However, PMI is removable usually now I'm going to speak usual now is up to your service provider. You make your on-time payments to usually they make you have two years of on-time payments. And for many of us, like here in California, getting a large increase of property value is possible in two years depending where you live in when you bought, you can request that the insurance is removed once you have 20% equity based on what you purchased it for. But it is only a request. The likelihood of the bank removing it is very slim because here's what you're asking the bank to do. Bank, I'm paying for insurance that protects you right now. You don't pay anything for it. Bank, I pay for you to be protected.

How do you feel about us? Me not paying that anymore? You remove the protection, what do you think? Can I save the money? No, they're really not interested in that story. They prefer protection. So it's up to them. Every servicer will have a different intake to your question. But Layla, they must remove it once you hit 78% of your original value. So if you bought your home for a hundred thousand dollars and you bought it down to $78,000, Layla in that moment, you bought it down to $78,000, the insurance stops instantly. It's not a choice, it's a requirement. So PMI is not a choice, it's a requirement.

PMI is a choice when we're not. It is a requirement for most lenders to make loans available to consumers that finance with less than 20% down. The good news is we don't have to wait. Somebody's willing to insure us. And for many of us, insurance is not forever. It's for a portion of time until our equity develops. Another way to remove PMI is to go and refinance out of the loan that you have. We don't have to keep that loan. We can refinance out of it if they don't remove it. Layla, we would do that if the interest rates were a bit better. It'd be a great reason to do it anyway. And then in the refinance you get rid of it. So there's several paths to get out of that story, but we're going to say thank you for those that gave it to us upfront. Why? Because they're letting us use their money instead of all of ours. And we might not have had it at the time, but now you have the house. So don't be scared of PMI. It's not forever. And it's a great tool to get into. Yes you did and yes you can. And how let somebody insure you this like having a partner with you. So

If you can get FHA insurance, remember I said that's great for lower credit scores. Here's the difference. Leila PMI is removable for many people, not all people. For most people utilizing FHA, using that three and a half percent down payment, well their insurance going to live for the life of the loan. They never get to remove it. I don't care if they got 50% equity, that insurance that they get is with the life of that FHA loan. Layla, yours is removable. Theirs isn't. Everything in life has a pro and a con for those with an FHA loan that build enough equity, that might be their invitation to refinance out of it and they'll remove the insurance at that moment.

Hannah (44:44):

Alright, well it looks like we're out of time for responding to questions on this week's episode of the Debt hotline. But Scott, I want to say thank you from the bottom of our hearts for joining us and talk a little bit about how to navigate home ownership and getting a mortgage loan and buying a house when you are struggling with other types of debt. I think the biggest takeaway I've gotten from this is that there are options out there. You can get creative and you should try to tell yourself yes because you have debt doesn't mean that the answer should be no. And one thing I do want to say, Scott, I was thinking this as you were answering the questions. There's that quote that says, stay close to people who make you feel like sunshine. And Scott, I got to tell you, you are one of those people. I loved your answers tonight. I love your positivity. Thank you so, so much for your insights, sharing your expertise. Do you have any last words for us, Scott, anything else that you want people to take away from this conversation,

Scott (45:41):

Please? I do.

Hannah (45:43):

Let's hear it.

Scott (45:44):

I said it before that you have the right for those that make their on-time rent payments, those could just be your mortgage payments. Here's what I could leave you with two words, just believe.

Hannah (45:59):

Love it. Just believe.

Scott (46:01):

Just believe you can be a homeowner.

Hannah (46:04):

Thank you so much, Scott. Well, thanks again for everyone for submitting your questions here on the debt hotline and listening in. We're really happy to answer your questions. If you have any other questions about debt, it could be related to homeownership or just about debt in general. Please go ahead and submit them to the debt hotline. You can do so by calling 801-613-8181, and you can leave a voicemail there. If you are struggling with debt, maybe if you're being sued for debt, go to SoloSuit.com. We can help you respond to the lawsuit, protect your rights by yourself, time to figure out your next options, your next steps, and we can also help you negotiate and settle your debts. Thanks again, Scott, so much for joining. We really, really enjoyed this conversation and having you here with us.

Scott (46:51):

Well, thank you so much. I did too.

Disclaimer: The information presented in this podcast is intended strictly for general informational purposes and should not be construed as legal, financial, or investment advice. Solo and its hosts are not licensed attorneys, financial advisors, or other certified professionals. While select guests may hold active professional licenses, their contributions are purely for educational and thematic discussion. They're not delivering professional or personalized advice. Solo is not a law firm, does not offer legal representation and must not be relied upon as a substitute for professional legal counsel. It is also not engaged in debt, settlement, credit repair, or financial counseling services. SOLO provides self-directed software tools designed to support users in navigating their own legal and financial situations. Participation in this podcast is not establish an attorney-client relationship. Listeners are encouraged to consult with attorneys or licensed professionals for guidance specific to their circumstances. The opinions expressed by podcast participants are their own and do not necessarily reflect the views or official positions of SoloSuit Inc. Doing business as solo or any affiliated organizations.


SoloSettle by SoloSuit

Settle your debt
Save thousands

Make a settlement offer in minutes — no lawyers, no upfront fees.

$2.5B+
Protected
~40%
Avg. Savings
Make an Offer
4.7 from 635 reviews


How to Answer a Summons for debt collection in all 50 states

Here's a list of guides on how to respond to a debt collection lawsuit in each state:

The Ultimate 50 State Guide

Debt collector guides

Are you being contacted by a debt collector? We're making guides on how to resolve debt with each one.

Arbitration

If the thought of going to court stresses you out, you're not alone. Many Americans who are sued for credit card debt utilize a Motion to Compel Arbitration to push their case out of court and into arbitration.

Below are some resources on how to use an arbitration clause to your advantage and win a debt lawsuit.

Bankruptcy

Bankruptcy is a great way to legally resolve debt, but it's usually best to consider it as a last resort. Here are some bankruptcy guides to help you decide which debt resolution option is best for you.

Check your case status

Don't have time to go to your local courthouse to check the status of your case? We've created state guides on how to check the status of your case throughout the US, complete with online search tools and court directories.

Credit

Debt has a big impact on your credit. Below is a list of guides on how to repair and improve your credit, even while managing major debt, along with other credit-related resources.

Debt collection FAQs

Find answers to some of our the most commonly-asked questions about debt collection below.

Debt collection documents and templates

If you're dealing with debt, these documents and templates will help you respond, protect your rights, negotiate, and resolve your debts.

Debt relief

We've created a specialized guide on how to find debt relief in all 50 states, complete with steps to take to find relief, state-specific resources, and more.

Debt settlement

Debt settlement is one of the most effective ways to resolve a debt and save money. We've created state guides on debt settlement. Find out how to settle in your state with a simple click and explore other debt settlement resources below.

Eviction

Facing an eviction? The following guides will help you navigate your situation with confidence.

Federal debt collection laws

Knowing your rights makes it easier to stand up for your rights. Below, we've compiled all our articles on federal debt collection laws that protect you from unfair practices.

Helping people find access to justice is at the heart of Solo's misison. If you're dealing with a legal debt issue, the following guides will help you through it.

Medical debt

Having a health challenge is stressful, but dealing with medical debt on top of it is overwhelming. Here are some resources on how to manage medical debt.

Personal finance

Learn how to manage your finances and overcome crushing debt. Check out our personal finance guides below.

State debt collection laws

Debt collection laws vary by state, so we have compiled a guide to each state's debt collection laws to make it easier for you to stand up for your rights—no matter where you live.

Statute of limitations on debt

Like all debt collection laws, the statute of limitations on debt varies by state. So, we wrote guides on each state's statutes and more.

Stop collection calls

Do you keep getting calls from an unknown number, only to realize that it's a debt collector on the other line? If you've been called by any of the following numbers, chances are you have collectors coming after you, and we'll tell you how to stop them.

Wage garnishment

Forgot to respond to your debt lawsuit? The judge may have ordered a default judgment against you, and with a default judgment, debt collectors can garnish your wages. Here are our guides on how to stop wage garnishment in your state, plus other wage garnishment resources.

The Debt Hotline

Hosted by Team Solo, The Debt Hotline breaks down debt and personal finance topics with help from attorneys, financial experts, and industry pros. We respond to real questions to help you navigate debt with knowledge and courage.

Other debt resources