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How much debt is too much when you want to apply for a home loan?

cdp224 asked:

I would like to apply for a home loan, but I have some credit card debt. I have good credit – never missed a payment, never been late, etc. I just don’t know if having credit card debt will cause me to be declined.
Asked on: 2012-09-21 04:25:40


  1. Fred B says:

    The bank will add in your credit card dept along with any other loans or debts and will assess it against your income and the amount of your home loan will be estimated taking into account your ability to pay.

    A bank will usually take the total amount of your credit card limit as your debt, not how much you’ve used of it. So, if you have a card limit of $30,000 but have only used up $1000 of it the bank will see it that your debt is $30,000, not the $1000. That’s the downside. Banks won’t usually decline you for a home loan just because you have a c/card. They work on your ability to pay your loan.

    If possible, try and pay off your card and destroy it! Have a debit card instead, then you only have access to money that you have, not money that you don’t have!

  2. Judy says:

    I would like to disagree with Fred just a bit.
    I have great scores and was offered a home loan at their best interest rate.
    I have cards – lots of them – with large available balance.
    It did not affect me at all.
    The secret is to have them all paid in full for the time you apply for your loan.
    Having high available balances and not using them shows that you are credit worthy.
    They can trust you.

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