For many Tennessee residents, a new home is a major purchase – probably the biggest purchase they will ever make in their lives. Paying a monthly mortgage payment can be challenging, especially if the homebuyer is struggling with credit card debt. Not only that, but lenders may be concerned about the debt and charge higher interest rates for the loan – or even deny it altogether. Read on to find out what homebuyers should know during the loan approval process.
Credit history is the biggest factor lenders look at when approving or denying loans. Lenders want to see consumers who pay their credit card bills on time or better yet, pay off balances every month. When they look at a credit report and see late payments or defaults, they become concerned.
How can one eliminate credit card debt? It’s not easy, but there are several ways to go about it. Some consumers transfer balances to a card with a lower interest rate, but this results in balance transfer fees of up to 5 percent of the balance. Debt consolidation loans are another option, but it can be challenging to find a decent rate.
But the answer is not necessarily to avoid credit cards altogether. Those with no credit history at all may find it even harder than someone with a lot of debt to obtain a loan. Lenders want to see consumers who can manage credit responsibly. This is hard to gauge when a consumer has never owned a credit card. The consumer may be forced to put down a larger down payment or find a co-signer.
Credit cards have many advantages when used responsibly. The best tip: Spend less money. Consumers should strive to live within their means. By doing so, consumers can save money in the long run by raising their credit score and qualifying for better rates.
Source: Forbes, “What To Do About Debt When Applying For A Mortgage,” Nov. 3, 2014