A home loan rejection forced me to pay off my debt

After more than 15 years of renting, I wanted to buy a home. At the same time, I also decided I wanted to become a freelance writer. Little did I know that those two dreams might not blend (at first, anyway). But they would teach me about managing my money.

I had recently become a single foster parent and adopted a baby girl. I wanted to spend more time with her, which is why I began working as a freelance writer as a side job. I planned to quit my job as an office manager for a physical therapy clinic and work from home to be with my daughter. 

A financial life with no plan

I put myself on a budget and saved about two months of salary before I gave my notice. When I quit my job to work from home, I was excited at the prospect. I wanted a better life for my daughter and me, which is why I decided to buy a home instead of renting. Little did I know I had just started down a dark financial path.

During the first few months of full-time freelancing, my cash flow was unpredictable, and I spent my savings. I didn’t realize how much I’d struggle to adapt to being my own boss. Managing my time, working when I didn’t have deadlines, and spending frugally were all lessons I needed to learn. 

I still had good credit, which I used to help me get back on my feet. My credit cards helped to pay for groceries and other bills as I worked to earn more income and keep a roof over my head. 

Once I settled into a routine and had steady work, I began looking at homes for sale. I estimated how much I could afford in payments, and I looked at properties within that range. I found a house that would fit my family.

My realtor encouraged me to put in an offer while applying for a home loan. I was pre-qualified (but not pre-approved) for a loan that would cover the selling price. The owners accepted my offer, and I started making plans to move. The home inspection came back with a few items that needed attention, but the owner was happy to take care of it all. 

A hard lesson about too much debt

We set a closing date as the lender worked on my loan. With less than a week until closing, I received devastating news from my lender that they couldn’t provide final approval because my debt-to-income ratio was too high. I had too much debt—my credit card payments, student loan payments, and other bills were too steep for what I was earning. 

I was crushed. All the plans I had made with the property I thought would be mine were gone. I had to call my realtor and tell her I couldn’t purchase the property. She informed the owners, who weren’t happy to hear the news. I was ashamed. It felt like I was the only person to have gone through such humiliation. 

A second chance

Shame and embarrassment couldn’t smother my determination. I knew I would have to get my finances in order, but I wouldn’t give up on my dream. 

My credit card struggle was real. I looked at using a loan to pay off my credit card debt. In the end I decided to try paying down my credit card debt on my own. In two years I paid my debts down enough to qualify for a home loan. After learning how to manage money, I bought a house on 10 acres as a self-employed single parent. 

Looking back on my situation now, my loan rejection was the push that I needed to prioritize my existing debt so I could purchase my dream home. If you have experienced a loan rejection, it’s ok. The shame that you may feel is very common—but just know that you are not alone. 

If you need help reducing your debt, a professional debt expert could help you figure out what the best approach to your debt might be. You can get a free debt evaluation today.

Achieve tip: Getting pre-qualified means you tell the lender how much income you have and they let you know what loan you might qualify for. They don’t verify any of the information you provide. Pre-approval means the lender verifies your income and checks your credit report, which allows them to evaluate your ability to make the payments on a new debt. Pre-approval is almost always more accurate than pre-qualification. 

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