Should You Pay Off Excessive Credit Card Debt Before Applying For a Mortgage?

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Should you pay off excessive credit card debt before you head off to the bank to apply for a new mortage? 

Owning your own home is a dream that many people share. But before you apply for a mortgage, you need to make sure that your credit rating is acceptable.

HERE ARE 4 THINGS YOU SHOULD DO

1. Make sure you have at least one year of on time payments showing on your credit report – Lenders like to see that you have a good history of making your payments on time. This helps to convince them that you will also make your mortgage payments on time.

2. Try to reduce your monthly credit card debt payments to no more than 10% of your income – This is one reason you should look into paying off excessive credit card debt before applying for a mortgage. If you have to much of your monthly income going towards paying off credit card debts, the mortgage company may be concerned that you won't be able to afford to pay for a mortgage as well. This increases the risk to them and decreases your chances of getting approved for a mortgage.

3. Do not apply for any new credit for at least one year before applying for a mortgage - Regularily applying for new or more credit  is another symptom of having excessive credit card debt. Mortgage lenders know this and it will be a strike against you. Keeping your credit to a minimum is a sign that you are a responsible spender and mortgage lenders like to see that.

4. Pay off any debt that is in collections – Any debt that is in collections status will likely show on your credit report and could be a strike against you. Make sure you pay off these debts and ensure that they are removed from your credit report before applying for a new mortgage.

Once you have taken these steps to clearing up any excessive credit card debt and cleaning up your credit report, it is time to reap the rewards of your hard work. Congratulations, you are now ready to apply for that mortgage.

If you feel that you could use some assistance in paying off your debts, I highly recommend Care One. They offer great service and free consultations to determine how they can best help you get out of debt.

For more debt management tips, please check out our more popular articles listed in the box below, or you can see our complete list of articles about debt.

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