It’s easy to think that if you’re managing your bills comfortably, adding a mortgage to the mix won’t be a problem. But when it comes to qualifying for a mortgage, lenders don’t see it quite the same way.
They’re not just looking at your income or your down payment, they’re looking at your whole financial picture. That includes any loans or monthly payments you already have, such as car loans, student loans, credit cards, and even lines of credit.
All of these affect your debt-service ratio, which is how lenders measure what portion of your income goes toward debt payments. The higher that percentage, the less room there is for a mortgage payment — and that can reduce how much you qualify to borrow.
Let’s take a closer look at how different types of debt can impact your approval range.
Vehicle Loans and Leases
That shiny new vehicle might seem affordable month to month, but from a mortgage standpoint, a $600 car payment can cut your approval amount by roughly $100,000 or more.
If home ownership is on your short-term radar, it’s worth having a conversation about how to best manage or restructure those payments before applying.
Student Loans
Even if your student loan is currently deferred, most lenders still include an estimated payment in their calculations — often around 1% of the balance per month.
So, a $25,000 loan could be treated as a $250 monthly expense, which can make a difference in your maximum mortgage size.
Credit Cards and Lines of Credit
Even if you pay off your credit card regularly, lenders still factor in a minimum required payment (usually about 3% of the credit limit). For example, a $20,000 limit could mean $600 per month counted against your affordability.
Paying down revolving balances can improve both your borrowing power and your credit score — but try to keep your oldest accounts open, since they help establish a long, healthy credit history.
Steps to Improve Your Affordability
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Pay Down Balances: Reducing what you owe helps free up monthly cash flow and may boost your credit score.
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Avoid New Debt: Taking on a vehicle loan or financing purchase before applying for a mortgage can have a bigger impact than you might expect.
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Consider Consolidation: If you’re juggling multiple payments, a consolidation plan can simplify things and potentially lower your monthly obligations.
Start the Conversation Early: Before making big financial moves, check in with a broker. Even small adjustments can make a noticeable difference in what you qualify for.
Let’s Build a Plan That Fits You
Every financial situation is unique, and the right approach depends on your goals, timeline, and comfort level. I can show you what your numbers might look like if, for example, you pay off that car loan or combine a few smaller debts.
If you’re thinking about buying or refinancing soon, let’s talk about what’s possible and create a plan that sets you up for success.