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The Loophole That Could Help You Buy a Home Even If You Have a Lot of Debt

December 14th, 2015 6:27 AM by Jackie A. Graves

It’s not impossible to buy a home when you have existing debts. Homebuyers do it every day, in fact. But you have to know how your existing debts are affecting your standing with the lender and the ways you may be able to exclude some debts from your loan approval process.

When you apply for a mortgage, the lender takes into consideration your credit score, the cash you plan to use on a home, your ability to pay back the loan, and the amount of expenses you have (including a proposed mortgage payment) against your monthly income. They’re the four Cs of lending: credit, collateral, capital and capacity. Each play a key role in your ability to obtain a mortgage.


Liabilities, such as monthly payments on other loans, take away from your capacity to handle a mortgage payment. If all of your income is going toward debts (with or without a mortgage payment included), loan qualifying can quickly become very problematic. Installment loans typically carry the largest monthly payments and hurt your chances of qualifying the most.

Posted by Jackie A. Graves on December 14th, 2015 6:27 AM


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