It is easy to see how a question as to does credit card debt affect mortgage approval can be very valid. Most homeowners do not realize how much debt their mortgage originated with. While the lenders have to report the balance owed on any new mortgages, they are also required to allow six months to a year for the homeowner to catch up on late payments.
If late payments continue after this time then lenders will be forced to report the entire balance due on the original loan.
Does credit card debt affect mortgage approval in this way?
Not directly, but it can make the process of getting a mortgage more difficult and longer for the average person. Lenders do try to manage their lending programs as carefully as possible. A borrower who has numerous unpaid credit card bills is less likely to be approved for a larger mortgage because of credit card debt. It does make financial sense to keep the credit cards paid and only carry a minimal amount of outstanding debt on them.
This does not mean that you should eliminate your credit card debt. In fact you should strive to pay off as much of your outstanding balances as possible. This will help you build a better credit rating and increase your chances of being approved for a bigger mortgage in the future. Credit card debt can have an adverse effect on your credit score if you carry high balances. However, if you only have a few credit card balances and make all your monthly payments on time then you will be able to maintain a good credit rating.
What does credit card debt affect when it comes to mortgage approval?
The answer depends on several factors. First, your credit score will play a key role. If you have many late credit card payments and some of them are charged off then lenders may view you as a greater financial risk than someone who has a lower credit rating but no outstanding debt.
In addition, your credit report will determine your credit worthiness. Your credit score will determine how lenders rate the risk of lending you money. Lenders want to know that you will make your monthly payments on time. If they find that you are falling behind in your bills or facing high interest rates, they are less likely to extend you credit. If your credit score is low they will look at other factors such as employment history and current income levels. All these factors will be used to determine if you are a financial risk based upon your past credit activity.
Your current income level
Your income is often determined by your card use. If you continue to use your card heavily then lenders will take this into consideration when determining your mortgage eligibility. For example, a person with a large credit card debt and a salary that are close to the poverty line may have difficulty getting mortgage approval. On the flip side a person with great credit and a high income level may have much better mortgage approval.
Credit debt affects your mortgage eligibility in many ways
It is important to make sure that you stay current on all your payments. The lower your debt-to-income ratio, the better mortgage loan you will be eligible for. Remember to check out the various offers that come your way; it is important to shop around before committing to a mortgage.
If you need answers regarding does credit card debt affect mortgage approval then you will want to check out the information that was just discussed. You should also keep in mind that you will need to work hard to build up your credit rating back up to a good level. This may require that you pay off any credit card debt that you currently have. You should also make sure that you keep your credit cards paid off at all times. Maintain a good credit score and you should have no problem getting mortgage approval.