Does Having Loans Affect Getting A Mortgage?

If you're looking to buy a house and also need a personal loan, the first question that crosses your mind is likely, "Does having loans affect getting a mortgage?" It's a great question!

Sadly, personal loans will impact your mortgage affordability. Lenders will check your credit score, on credit reporting companies like Equifax and Experian, and monthly loan debt and expenses to establish whether you can afford the mortgage payments. But here is what you need to know to answer the question "Does having loans affect getting a mortgage?".

In this article, we will discuss mortgage approval with existing loans so you have a better idea about the impact of loans on mortgage application.

How To Figure Out If Your Loans Affect Getting A Mortgage

Yes, mortgage services providers consider all your debts when determining whether you're eligible for a home loan and how much you can afford to repay monthly.

Any debts aside from the mortgage will play a significant role in how the provider views your application. Since you're already using a portion of your income to make payment on other debts, you have less income available to put toward a mortgage.

If you are looking to apply for a mortgage and haven't yet taken out any additional loans, financial advisors recommend that you keep it that way. The more available money you have, the more likely you are to qualify for a mortgage loan. Some experts will even suggest leaving a 6-month gap between taking out a personal loan and applying for a mortgage. This helps to avoid the worry of mortgage approval with existing loans and the rise in interest rates for borrowers that may pose more of a risk.

Can Applying For A Loan Impact Your Mortgage Eligibility?

While not always the case, your mortgage lender can use applications for personal loans as grounds to disqualify you from a mortgage.

This sort of financial activity leaves a stamp on your credit file/report, resulting in lenders seeing it when they assess your mortgage submission. So, the impact of loans on mortgage application can affect approval.

The following financial aids, in particular, harm your mortgage affordability:

• Credit card;
• Overdraft;
• Personal loans; 
• Car finance;
• Mobile phone contract;
• Utility contract.

Generally, the more applications you request to different loans in a short timeframe, the less likely you are to have sufficient credit scores and gain approval for a mortgage. However, you can sometimes increase your approval odds by adding a mortgage co-signer. 

Can You Still Qualify For A Mortgage If You Have Other Loan Debt?

Once you’ve answered your initial "Does having loans affect getting a mortgage?" question, you might be wondering whether all hope is lost. But thankfully, that's not the case. It is possible to get a mortgage and have a personal loan at the same time!

It’s all about managing loans and your debt-to-income ratio when it comes to mortgage eligibility or any loan or credit approval. Lenders like your debt-to-income ratio to be no more than 36%, meaning you are only using 36% of your debt. For instance, if you were approved for a combined credit limit of $10,000, consisting of maybe a loan and credit cards, you should only be using $3,600 of that credit limit to show that you have a good DTI ratio.

Even though lenders take all your debts into account, it won't necessarily prevent you from receiving a mortgage as long as you have a good DTI ratio and a good credit history. When providers look at your financial climate, they'll look at whether you have enough money to take on additional finance, and whether you have been responsible with requesting credit and making payments on existing credit. If so, and you can afford the extra, you'll gain approval.

Although, it's worth noting that not all mortgage providers evaluate applications the same way. To ensure you get the best value, speak to a whole-of-market broker who can access mortgages across the United States.

How Personal Loans Can Sometimes Improve Your Mortgage Application

It's not all doom and gloom. At times, existing loans can help when you apply for a mortgage! But you'll need to take the long-term view of things if you want them to benefit you. There are three ways you can use additional loans to help your future mortgage efforts:

• Boosting your credit score — A loan can help boost your score when paid on time. Title loans, however, won't work here as they're not reported to the credit bureaus.
• Refinance — Some personal loans can be used to reorganize your existing credit card debts to make them cheaper and easily manageable. Over time, it increases your mortgage affordability and helps manage loans for mortgage eligibility.
• High interest — People use certain loan types to put the money in a high-interest savings account. The accrued funds are then used as a mortgage deposit.

Using Mississippi Title Loans, Inc. To Increase Loan Approval For A Home Loan

While the answer to "Does having loans affect getting a mortgage?" is yes, small loans like Mississippi title loans and payday loans can help when emergencies strike. They can be paid off relatively quickly and are a popular option when you're struggling to pay medical bills, fix your home, or fund urgent travel while applying for a mortgage. They also aid in paying overdue bills that are likely to be reported to the credit bureaus. Unpaid bills can seriously affect your credit rating, and prevent you from getting a mortgage loan.

To start our process for either loan, just fill out the online form on our Mississippi Title Loans, Inc. website and wait for our phone call. From there, if you're getting title loans, you'll need to bring your driver's license, lien-free vehicle title, and your vehicle to a car title loan location near me or another more convenient location.

If you're acquiring payday loans, make sure you bring your photo ID, pay stub, a blank check from an active checking account, and your bank statement to the store. Once you read and agree to the loan terms, you can get your money, the same day if you are approved for either loan.

Now That You Know How A Personal Loan Can Affect Your Mortgage

With all this information, you should be able to answer your “Does having loans affect getting a mortgage?” question. Knowing this information about your mortgage and loans can help you decide what your next step should be.  

If you decide title loans or payday loans are a good fit for your situation, fill out our online form to get started and a loan representative will call you soon after.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.