Paying down debt is an important part of qualifying for a loan, so it’s important for you to know how to pay down your debt.
Paying off Debt too Fast:
It’s easy to think that paying your debts off faster is better. However, paying your debts off too quickly shortens your credit history. You want to prove that you can make payments on time rather than showing how quickly you can pay off your debts.
Closing Lines of Credit:
Many buyers think that closing the credit cards they don’t need is the responsible thing to do. However, this can have a negative impact on a number of factors that affect your credit score. Work with a credit consultant or certified program to help you use or eliminate those cards responsibly.
Debt to Income:
There is a maximum amount of your income that can be used for paying down debt. Going over that limit can stop your loan process, even with a perfect credit score. Your mortgage payment, plus your other debt payments, should be less than half of your gross income; consider setting a limit of 40%-45% of your income.
Contact a lender in advance to find out where you stand and where you need to be in order to be pre-approved. When in doubt, seek expert advice before trying to fix things yourself.
Norman Hardman
Prestige Property Brokers
Realtor: GA & AL
