Before applying for a mortgage, lenders may require individuals to clear any outstanding federal debt, such as tax liens or unpaid federal student loans.
6. Federal Debt
A car loan adds to your overall debt load. Thus, it can affect your mortgage application. Getting a mortgage can be financially challenging if your car loan payments are high.
5. Car Loan
Lenders assess the monthly payments you make towards your student loan to determine your debt-to-income ratio. But unlike other debts, student loans are more flexible and usually have lower interest rates.
4. Student Loan
Child or spousal support is part of your debt-to-income ratio. However, a percentage is added to your income if you receive a child or spousal support.
3. Child & Spousal Support
If you’re applying for another mortgage, lenders will determine your debt service ratios to ensure subsequent mortgage payments are affordable. A mortgage may be your largest debt; however, it may factor less than other debts. What you may not know is a home equity line of credit (HELOC) is treated like a mortgage when assessing debt.
2. Mortgage and Home Equity
High credit card debt negatively impacts your mortgage approval. Lenders usually focus on your total credit card balance to determine your monthly payment. Your credit utilization rate may still be affected even if you have a high credit card balance and pay your monthly payments on time. That’s why using 75 per cent or more of your credit limit is discouraged. Likewise, paying only the minimum amount due on your credit card debt can lower your credit score because it has minimal impact on your balance.
Credit Card
