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Summary: Do you have debt that you’re currently carrying? If so, how will it affect your ability to get a mortgage in Washington state? Read on to find out more.
Carrying debt is common among consumers. From student loans, to credit cards, to auto loans and beyond, debt is something that many consumers carry. But how will all that debt impact your ability to secure a mortgage in Washington state? When you’re interested in buying a new home, you might wonder whether or not your debt is going to hurt your chances of qualifying for a new mortgage.
Fortunately, you may still get a new home with that debt. There are several factors that may determine whether or not you qualify including the following.
The debt-to-income ratio (DTI) is a major factor that the mortgage lender is going to consider when deciding whether or not you will qualify for a new mortgage and is a measure of the amount of debt you have relative to your income and is usually expressed as a percent. Essentially, your DTI represents how much of your monthly gross income is dedicated to pang your current monthly debts.
In general, the magic number is 43 percent. If your debt exceeds 43 percent of your total income, the lender will have a hard time giving you that new mortgage.
For example, if you make $5,000 per month, you will want to have less than $2,150 in monthly debt payments. To make yourself a more attractive candidate for a mortgage, try paying off some of your existing debt. This will help to lower your DTI and improve the odds that you can secure a mortgage at a decent interest rate.
The lender is also going to consider your credit score. Your credit score is an overall assessment of your financial health and paints a picture of the type of borrower you would be. It takes into account a number of important factors, including your payment history, number of debt accounts you have, the amount of debt you carry, and credit utilization.
The higher your credit score, the higher the odds of being able to secure a mortgage, while a lower score will put you at risk of having your loan application rejected. Further, a good credit score will also afford you with a lower interest rate on your mortgage which can help you save a lot of money over the life of your loan.
While many things affect your credit score, your debt load is one of them, as already mentioned. If time is on your side, consider taking the time to pay down your debt as much as possible to help give your credit score a boost.
How much of a loan do you need to cover the cost of a home purchase? Your ability to get approved for a loan will also come down to how much money you actually need to borrow relative to the purchase price of the property. More specifically, your loan-to-value ratio (LTV) will come into play. This is a measure of the loan amount compared to the value of the home and is usually expressed as a percentage.
The higher the LTV, the riskier the loan will be for the lender, and therefore the lower your chances of getting approved for a mortgage in Seattle, Bellevue, or any other city in Washington state. If you can come up with a higher down payment amount, your chances of getting approved for a home loan will improve.
But the amount of debt that you carry could stand in the way of you being able to save up for a large down payment. That’s why it’s very helpful to take some time to pay down your current debt in order to make more room to save up for a larger down payment to keep your LTV as low as possible, thereby improving your chances of securing a mortgage.
Finally, the lender is also going to take a look at whether you can take on the responsibilities of owning a home. The monthly mortgage payment isn’t the only expense you will be taking on. Some of the other issues you will have to handle include property taxes, maintenance costs, and homeowners’ insurance.
The lender that you work within WA will want to ensure you can handle these costs. To make these expenses easier to bear, it might be a good idea to pay off some of that existing debt.
Looking for a new home in Washington is exciting. You can purchase a house with existing debt as long as it is minimized and managed well. Think about these factors before investing in a mortgage. And as always, consult with your trusted local mortgage professional for the best advice on your personal situation.
Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region that includes Idaho, Colorado, and Oregon. We offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have mortgage-related questions.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.