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3 Loans That Will Negatively Impact Getting a Mortgage

By
Real Estate Agent with eXp Realty 40241196

A good credit rating is built on a number of financial factors including paying your bills on time and the length of your credit history, but loans can also be a source of bolstering your credit score in a positive way. While this means that loans can actually be a good thing, there are also the kinds of loans that can have a damaging impact on acquiring a mortgage. If you'll soon be pursuing your own home purchase, here are some loans that may have a negative impact.

Borrowing For Education

When you are young, student loans are an ideal means of paying down your debt and developing a positive credit history. However, if these loans are left to linger they can have a marked effect on your chances of a mortgage approval. Since paying back your student loans will be one of the first times in your financial life that you'll be able to prove your reliability, you should ensure you pay them on a consistent basis in order to lower your overall debt-to-income ratio.

Credit Card Debt

Many people don't think of the purchases that go on their credit card as loans, but the money on your credit card does not really belong to you until it's paid off. While credit cards can be a great boon for establishing your credit in the early days, if you rack up a lot of credit card debt and do not pay your minimum payments by the due date, it will cause a considerable dip in your credit score. In addition, taking on too many cards can be a negative signal to lenders.

Payday Loans

In recent years, payday loans have sometimes been broken out separately from other loans on a person's credit report. However, unlike many other types of loans, payday loans can be seen in a bad light by lenders because they can be indicative of someone who's experienced significant financial setbacks, which would negatively impact their ability to pay a mortgage. While some mortgage lenders will not decline an application due to payday loans, some have already started to take this step.

Acquiring loans can be a good means of developing a credit history, but there are types of loans that may look bad on your mortgage application and won't be of service if you can't pay them off consistently. If you're considering submitting a mortgage application, contact your local mortgage professional for more information.

Comments (7)

Joe Jackson
Keller Williams Capital Partners Realty - Columbus, OH
Clintonville and Central Ohio Real Estate Expert

This is an excellent post with great information. Thanks for sharing it.

Have a super fantastic week!
Joe Jackson, Realtor-KWCP

Jul 18, 2022 07:40 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Hi Bob... great information, especially, for that younger first-time buyer. I'd never given pay day loans any thought, as I'd always assumed people who get those would not be in a position to be approved for a mortgage.

Jul 18, 2022 08:30 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Bob Elliot all three can have a big impact, especially student loans.

Jul 18, 2022 08:34 AM
Fred Sweezer Sr. CMI, LLC.

Yep, thank you for your post.


 


 

Jul 18, 2022 11:46 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Great post!  I'd love it if this were taught to high school kids before graduating HS and taking on debt.  All too often they get to college years and don't understand credit or how to create a credit history effectively. 

Jul 19, 2022 10:50 AM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Good to know!  Especially for First Time Homebuyers starting out!  There are many pitfalls ... Thanks for sharing this post!

Jul 19, 2022 02:36 PM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.   Thanks for sharing and enjoy your day!

Aug 08, 2022 07:52 AM
Charles Ross - eXp Realty LLC
eXp Realty LLC Salina Group - Salina, KS
Love To Help People

Excellent information. Thank you for sharing. Have a wonderful day and a blessed weekend.

Feb 17, 2023 03:48 AM