What to Do Before You Get A Mortgage
Are you planning on buying a home in Southern California and getting a mortgage?
Like most buyers, you may be wondering if you should pay off certain debts before applying for a mortgage loan.
This is an excellent question to have.
Yes, paying down debts will help you but, the key to success with paying down debt is working with a preferred mortgage professional because they will be able to coach/advise you on which debts you should pay down and how the process works.
Paying Down Debt Will Lower Your Debt-To-Income Ratio
When you pay off debt this will lower your debt-to-income ratio (DTI).
Your debt to income ratio is the percentage of your gross monthly income that you apply to paying your rent, credit cards, debts, expenses or mortgage.
Most mortgage lenders look for a debt-to-income ratio of at least 43% but there are some cases where they may be willing to work with a higher DTI if you have a significant amount of money saved or other cash reserves.
Paying Down Debt Will Increase Your FICO Score
After paying down debt your lender will do a rapid rescore; this will bump your FICO score up from what it was before paying down the debt to your new score within 5 business days.
A higher score means that you may be able to qualify for a better interest rate especially if you’re getting a conventional mortgage loan.
Paying down debt definitely does help you with getting a better interest rate and a better mortgage.
The key to success with paying down debt though is working with a preferred mortgage professional, because, your mortgage lender will be able to coach/advise you on how this process works and which debts you should pay down.