Mortgage Blog
How Different debts affect your mortgage approval
June 25, 2024 | Posted by: Sarabjit Dhuna
Are you to trying to buy new home? Your any types of debts are critical part of getting mortgage approval. In this article, we outline that how different debts affect your mortgage approval.
Your debts have different weighed on mortgage approval
According to TransUnion reports around 92% Canadians carry balance and it is increasing every year.
If you have good credit history then it will be easier to qualify for mortgage loan. If you can manage debts well then you may qualify for higher home amount and low interest rate to purchase new house.
Lenders likes to see different credit history and all debts have different weigh on mortgage approval.
How Different debts affect your mortgage approval?
Federal Debts
If you owe taxes to government then pay as soon as possible. You must need to pay before you get mortgage pre-approval.
Line of Credit or credit card debt
For this type of debt, Lender tries to look at the entire balance to calculate the amount you must be paying every month to clear the debt. If you have higher balance like more than 75% of your limit, then it will be difficult for you to qualify for mortgage so, it will be better if you can keep your balance less than 75% of the limit.
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If you pay only minimum payment, then it can hurt your credit score and difficult for you to qualify for mortgage.
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If you pay consistently every month and you have higher balance, then it leads to credit utilization rate and debt service ratio
Mortgage Debt
Mortgage is considered installment debt. It is often longer, and it will be paid back in several years (25 to 30 years). Lender will use potential monthly payments depending on affordability or if you have mortgage then your monthly payments. It may factor less compared to other debts like credit cards.
Installment debts
Car loan is example of this installment debts. This is also long-term debt around 1 to 8 years. Lender will factor only monthly payments not the entire balance.
HELOC debts
Lender will factor entire balance not the monthly or biweekly payments. HELOC will use your home and property as equity so it will be less weighed less than other debts
If you have any questions regarding mortgage, then contact Sarabjit or visit our website centum united mortgage.
If you are looking for pre-construction condos or home, then check our website for new projects on own Ontario home
