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.
If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.
There are many options when it comes to taking out a loan on a new home. One of the options that people might have heard about is called owner financing. In general, the property owner takes the place of a traditional lender.
Recent medical school graduates, saddled by high student loan debt, sometimes have a hard time qualifying for a first mortgage. Now, however, a growing number of lenders will consider future earnings potential of high earners in the medical profession as a way to offset high debt ratios. But specialty mortgages for young physicians aren’t the only unique loans available today.
PMI, which is also called private mortgage insurance, is protect that the lender may ask the buyer to purchase. In the event that the buyer defaults on their home loan and the home enters foreclosure, the lender has a way to recoup their losses.
Your credit report influences whether or not you’ll qualify for a mortgage and what kind of interest you’ll pay on that loan. This isn’t something you can safely ignore. Smart homebuyers understand the importance of monitoring credit scores and credit reports. Here is some information about how to get your credit report.
For a long time after the real estate housing crisis in 2008, buyers with a poor credit history had a difficult time finding mortgage financing. It was a problem that trapped those seeking to buy a home because so many lost their homes from the inability to pay their mortgages.