Your Lake of the Ozarks Mortgage Lender: A Few Ways Debt Affects Your Mortgage

If you are looking into financing a home at the Lake of the Ozarks, you’ve surely heard about how your credit score can impact your purchase. Many factors will play a role in your home buying endeavors, but one that you may not have thought about is your debt to income ratio. This one little aspect can play a huge role in your home-buying plans, so it makes sense to take a few moments to evaluate it. Here are a few things you may want to know about debt and mortgages and how they work together.

What is Your Debt-To-Income Ratio?

When determining what your debt to income ratio is, you can quickly do the math and come to your own conclusion. You will add up all of your monthly payments including credit cards, personal loans, and current mortgages. You can then divide that number by your gross monthly income. This resulting number is your debt to income ratio, and it will help your Missouri lender determine if you can afford another debt payment each month. An ideal debt to income ratio would be 25% or less, and if your debt to income ratio is above 43% you may need to wait a little longer to buy a home and spend some time paying off your current debt.

Unsecured & Secured Debt

Did you know that there are different types of debt? In fact, some can actually show that you are reliable while others may hurt your chances of securing your mortgage. The two main types are secured and unsecured. Here are a few details about these types of debts and why you may or may not want them.

Unsecured

Credit card debt is considered unsecured debt and can be detrimental to your scores if your current balance is more the 50% of your available credit limit. That means nothing is backing it, you can’t trade anything in or foreclose on it. It’s debt that is not secured to an item. Student loan debt is also considered unsecured, but it isn’t necessarily bad if you are consistently paying your bills on time. In many cases, student loans can even help raise your score. However, other loans like personal loans or credit card debt, even when paid on time, can still lower your score.

Secured Debt

Secured loans include auto loans, mortgages, or any loan that is balanced against something that could get taken away. There are some cases where auto loans can raise your credit score by diversifying the type of debts you have. Sometimes an auto loan can also be viewed more favorably than credit card debt because auto loans are harder to obtain than credit cards. Did you know that mortgage payments can also look good on your credit report? As long as they have been paid on time, that is. If you were ever late on a payment, that can look like a risk to a new lender.

If you're concerned with how your debt will affect your chances of obtaining a home loan at the Lake of the Ozarks, give us a call at 573-746-7211. We can discuss your questions and concerns, go over your financing options, offer competitive interest rates, and back it up with the first-class service you deserve. Together, we'll work towards getting you into that dream home of yours!

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