Ultimate Guide for Applying for Mortgage With Credit Card Debt
Credit card debt will make it more difficult, but still not impossible, to get a mortgage. Mortgage lenders look at a variety of things when looking over your application while applying for a mortgage, but any debt you have will not immediately ruin your chances of getting a loan. There are things you can do that can make your mortgage application easier. These will be addressed below to give you the best chance of success in securing a loan.
What factors do lenders consider when I apply for mortgage?
Unfortunately, credit card debt can mean that mortgage holders are in financial difficulties. From their point of view, there could be a possibility that you may fail to repay the loan such that they may need a comprehensive analysis of your financial history.
They can look at your income, which includes your salary, but also additional income from stuff like savings or rental income from BTL properties if you have. The applicant would need a regular monthly salary of income so that the monthly contributions will be assured. From your income statistics, the lender would be able to calculate your affordability and see how much you would be able to pay for your mortgage per month.
To analyse your personal financial circumstances, the lender would take into consideration how much of the debt you have been able to repay, and if these repayments have been made on schedule. They will also look at your other necessary expenditure which is difficult for you to give up and this will help your lender to decide how much you can borrow and how much monthly repayment you can afford.
Also Read: Top 10 Reasons A Buy To Let Mortgage Application May Be Rejected
How will my debt affect my mortgage application?
Having a credit card is very common nowadays and most people use a credit card to manage their finances or to overcome some emergency situation which was not expected. As long as the repayment is affordable and the client is not in debt and able to make monthly repayment on time, it does not affect your credit score negatively. A lot of people use credit card to increase their credit score. Most Mortgage lenders look at your overall credit profile with your credit history and if you did not have any credit issue in part or you are not struggling to repay your credit card and the loan amount requested is affordable after considering all the income and expenditure then they are happy to lend if you meet their lending criteria.
Also Read: Benefits of Paying Off Mortgage Loans
Will my debt affect how much I can borrow for my mortgage?
When lenders measure your affordability, most lenders expect that you do not miss the monthly repayment of your credit card. It gives them an idea of how good you are in managing your payments. The lender will do the affordability check before they will consider any mortgage amount. The lender would want you to feel good about being able to pay for your mortgage payment every month. Therefore, if you have a lot of credit card debt and your monthly costs are high, your loan is expected to be lower.
Is there anything I can do to boost my mortgage application?
It is important to manage your credit very well if you want lenders to consider your application. The lenders use an affordability calculator and they use a credit check which allows them to understand your financial circumstances and find out how much loan you can afford and how much monthly repayment is comfortable to you. That is why it is important to manage your expenditure as per your income and manage your credit very well.
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What should I do before applying for mortgage?
If you have a loan, coming up with a solution before applying for a mortgage is likely to increase your odds. You should know the following:
- Closure of unused credit card and loan balances.
- Paid down your loans to reduce the rate of use of your credit and the value of your debt.
- Build up your credit history with daily payments.
- Cutting down any unnecessary memberships or expenditures
- Try to save more deposit which can get better interest rate from lender
Mountview FS has a great deal of expertise in the management of mortgage applications. Our experienced Mortgage Brokers will be able to provide you with the best guidance and level of coverage to suit your mortgage needs.
If you would like to hear more about mortgage applications with credit card debt or how Mountview Financial Solution will help you protect your need. You can reach us by email @ 02080950120 or send us your requirements at info@mountviewfs.co.uk!