How Does My Existing Debt Affect Getting A New Mortgage?

By
Mortgage and Lending with CrossCountry Mortgage, LLC NMLS #3029 NMLS #126036

Carrying debt is a common problem that people have. Some of the most common types of debt include student loans, credit cards, and motor vehicles. When you are interested in buying a new home, you often think about whether or not your debt is going to hurt your chances of qualifying for a new mortgage.

Fortunately, you may still get a new home with that debt. There are several factors that may determine whether or not you qualify.

Your Debt to Income Ratio

The debt to income ratio is a major factor that the mortgage lender is going to consider when deciding whether or not you will qualify for a new mortgage. In general, the magic number is 43 percent. If your debt exceeds 43 percent of your total income, the lender will have a hard time giving you that new mortgage.

For example, if you make $5,000 per month, you will want to have less than $2,150 in monthly debt payments. To make yourself a more attractive candidate for a mortgage, try paying off some of your existing debt.

Taking A Look At The Credit Score

The lender is also going to consider your credit score. The higher your credit score is, the more likely the lender will reward you with a loan. In order to keep your credit score high, make sure you manage your debt well.

Making your debt payments on time will keep your credit score high. Missing debt payments will lower your score. Manage your existing debt well and you will have a better chance of qualifying for a mortgage.

Making Sure You Can Handle A Mortgage

Finally, the lender is also going to take a look at whether you can take on the responsibilities of owning a home. The monthly mortgage payment isn’t the only expense you will be taking on. Some of the other issues you will have to handle include property taxes, maintenance costs, and homeowners’ insurance. 

The bank or credit union will want to ensure you can handle these costs. To make these expenses easier to bear, it might be a good idea to pay off some of that existing debt.

Investing In A New Mortgage

Looking for a new home is exciting. You can purchase a house with existing debt as long as it is minimized and managed well. Think about these factors before investing in a mortgage. And as always, consult with your trusted local mortgage professional for the best advice on your personal situation.

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For help or questions contact:

Joe Gonzalez

Senior Loan Consultant -  NMLS #126036
GMH Mortgage Services, LLC
625 W. Ridge Pike, Building C, Suite 100 | Conshohocken, PA  19428 | Direct: 610-355-8039 |  Cell: 610-739-6563

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Topic:
Home Buying
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Pennsylvania Montgomery County King of Prussia
Tags:
debt
loan qualification
mortgage

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Rainer
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Rose Mary Justice
Synergy Realty Pros - Dandridge, TN
Synergy Realty Pros

Yes it does.  Taking care of your credit is the most important part of your life.  It will always go with you throughout your life.

Nov 08, 2019 08:20 AM #1
Rainmaker
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Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Nice summary, Joe.   I always cringed when clients were willing to take on ALL the debt they could qualify for. I liked to encourage them to leave a little breathing room.

Nov 08, 2019 11:01 AM #2
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Another problem I've experienced is when buyers take on more debt during the closing process. I advise them to keep their expenses consistent with previous months but I've had clients go under contract & make a big purchase anyway thus torpedoing their transaction.

Nov 08, 2019 02:04 PM #3
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Rainmaker
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Joe Gonzalez

NMLS# 126036 (610) 739-6563
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