Mortgage Approval Easier Without Credit Card Debt

Paying off credit card debt could make it easier to get a home loan

Mortgage Approval Easier Without Credit Card Debt
October 27, 2016

Changes to the information that mortgage lenders may access mean financial institutions can now investigate borrowers' credit card payment histories. Homebuyers making full or consistent repayments may gain an advantage when applying for a mortgage.

Before, mortgage lenders assessing your home loan application could only look at your total debt and whether you made repayments on time. There was no way for organizations to know whether you paid your credit card balances in full. This changed in September, with TransUnion and Equifax now providing "trending data" to lenders. A more detailed look at people's financial state is now available, which includes the amount they have paid towards any credit card debt.

Mindy Armstrong from Fannie Mae says that this will benefit homebuyers who are on the border between application approval and denial. For example, two consumers applying for a mortgage may seem equal in their credit profile, but one of them pays off all their credit debt each month, while the other pays only the minimum. In the past, both consumers may have been placed on a "maybe" pile. With the new data available, paying off outstanding debt could tip the first consumer towards approval.

If you're applying for a home purchase loan, first sorting out your credit card debt could make the difference between having your mortgage approved or denied.

If you want more credit, check out MoneyTips' list of credit card offers.


Photo ŠiStockphoto.com/BrianAJackson

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