This is How Much Debt You Can Have and Still Be Pre-approved for a Mortgage
Many people wait until the day their slate is clean before they dive into the home ownership waters. However, a little debt doesn't necessarily mean you're not ready to buy a home. There are some limits, yes, but before you decide that you can't buy a new house, read the following and you might be encouraged to keep moving forward.
Amount of Debt
Lenders generally will loan mortgages
to those with less than 36 percent of their gross income in debt. If your credit cards, auto and student loans, outstanding bills, and projected home insurance is less than roughly 1/3 of your income, you could be entitled to a mortgage, granted that you are paying back your debts on time in full and your credit score meets the required standards.
Remember that even if your debts are under the above amount, if your credit score is less than 640-670, you could still have a hard time getting pre-approved for a loan. If you're having a hard time paying down your debt, even if it's due to a high rent payment, you're perceived as being in a situation where a mortgage
could also be difficult to pay. On the other hand, there are many lenders that are willing to take all of these things into consideration. It's a good idea to actually ask for pre-qualification from a lender before assuming anything. While pre-qualification does not guarantee a mortgage loan
, it will give you a better idea of your financial situation.
Take a look at your situation thoroughly before you apply to be pre-approved for a mortgage. Don't be afraid to contact several lenders to find which one can give you a better interest rate and even less closing costs. When you find a lender who will work with you, take advantage of the opportunity by finding a home and getting pre-approval as soon as possible. While lenders prefer to work with people with perfect credit scores and little debt, there are those who will take a chance on you if you can prove or convince them that you will pay your mortgage payment