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Can Your Credit Card Debt Block You from Getting a Mortgage?

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Can Your Credit Card Debt Block You from Getting a Mortgage?

As it is with every other kind of loan, mortgages come with conditions that you have to meet in order to be eligible for one. One of the major requirements is having a credible debt history. The process of validating you as a borrower will involve scrutiny of all your credit details, including your credit card debts. Let us look at how your credit card debt affects your eligibility to get a mortgage loan.

Your Credit Card Debt as a Basis for Missing a Mortgage

Your credit card can be used as an indicator of your spending habits versus your earnings. It is also used to determine your credit utilization ratio, the comparison between how much you spend and how much you earn. If, for instance, your credit card has a maximum limit of $10,000, yet you have used up $9000 of it, then your spending ratio is pretty high, 90%. It shows that you spend far more than you should, and it is as an indicator of your general credit utilization ratio.

This is the one direct way in which credit card debts can infringe on your eligibility for a mortgage. Your debt on credit card can also be used to gauge your DTI (debt-to-income) ratio. DTI gauges how much you spend paying back your 90-day bad credit loans per month versus what you actually earn. Let’s put that more clearly. You earn $2,000 per month. However, you have a number of loans, including credit card expenses, that you pay off per month and the total comes to $1,500 per month, which translates to 75% of your income.  This ratio is bound to put questions in the lenders’ minds regarding a mortgage.

Does Credit Card Debt Affect Your Credit Score?

Much like any other debt, credit card debt also disturbs your credit rating. See, credit bureaus analyze your entire credit history, and this does include your credit card debts. It follows that if you have a number of unpaid credit card debts or are even running a number of credit cards at the same time and missing some payments, your credit score will go down. This is bound to affect your chances of accessing mortgage financing because your credit score is top on the list of qualifications.

How to Qualify for a Mortgage

Being a necessary loan, mortgages come with strict requirements that you have to adhere to in order to get one. For starters, you need to have a credit score of 580 at the least, and this is only if you are getting FHA loans. All other types of loans, be it conventional loans, USDA loans, or even VA loans, you have to have a credit score of above 640.

Another requirement is the ability to prove your income. This is important because lenders will need to determine if your income is sufficient to cover the installments needed to be made per month. This is where your DTI ratio comes into play. If you are employed, you are required to provide copies of your W-2’s, which should show that you have worked in the same company for at least 2 years. If you are a wage earner, then you need to show your tax return records, which will show an average of what you earn.

You also need to provide the loan company with bank statements running at least three months back, the previous two years of tax returns records, as well as any additional income records.

Finally, you will need to show that you can have the down payment percentage required. The percentage required varies with the loan you get, though the lowest is in FHA mortgages that require a down payment of 3.5%.   However, it is good to point out that with a high credit score, you are more likely to get lower interest and down payment rates.

How to Make Credit Card Debts Work for You?

If you want your credit card debts to be a good testament of your ability to get a mortgage, you need to start paying them off on time. However, if you already have a bad credit record because of them, then you need to come up with a payment plan that allows you to pay off that month’s amount, plus a bit of the debt.


If you are looking to own a home, through mortgage financing, it is important that you clean up your debt record, including your credit card debt. Your credit record is consolidated, so it involves all forms of debt.

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Ameyaw Kissi Debrah, known professionally as Ameyaw Debrah, is a Ghanaian celebrity blogger, freelance journalist, and reporter.

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