It’s no secret that Credit Card Debt affects your mortgage applications. Many Canadians have outstanding debt which they believe will completely hinder their chances of ever having a mortgage. But we have news for you: as long as you manage your debt well, you’ll still be able to get a mortgage.
Mortgage lenders will look at many aspects of your finances and financial history to determine whether or not you will be able to pay back the funds they provide.
Mortgage professionals understand the ins and outs of credit card debt and look deeply at the Debt to Income Ratio and Credit Utilization Ratio of the applicant.
Lenders will look at your Debt to Income Ratio to identify your reliability to pay back the mortgage loan.
A debt to income ratio of 40% is usually the maximum that they approve. Higher than that and you risk not being approved because in their eyes a substantial amount of your income is already being used towards paying off current debt.
Your Credit Utilization Ratio should be kept low. If you’re using a high percentage of your limit, no matter what that limit is, you may be seen as a higher risk. This can also negatively affect your credit score which is also important when applying for a mortgage.
Lenders will sometimes even asses purchases made with your credit card to see if you spend your money wisely or if your using your credit for unnecessary purchases. If you do seem to spend more money places that aren’t essential you may be seen as unreliable.
It is possible that some Lenders may not see your higher credit utilization as a negative entity. If you have a good handle on your debt, pay more than the minimum balance and have low frivolous spending they may see you as responsible and consider giving you the mortgage.
There are many factors that Mortgage Lenders will peruse while assessing a mortgage application.
If you’re looking to get a mortgage, remember these tips when it comes to credit cards:
Do you have more Questions? Let us set you up with a mortgage professional who can help you! Contact us Here and we will help any way we can!