Pay Down Debt to Increase Your Mortgage Purchasing Power

Lenders look at three factors to determine whether you qualify for a mortgage loan and how much you qualify to borrow.

  1. Cash, lenders usually expect that the buyer contribute some money toward the purchase of the home. You need to have savings to cover:
    • Down payment (typically 2-3%, of the purchase price of the home)
    • Closing costs (3-5% of the mortgage loan amount)
    • 1-2 months living expenses as emergency reserves (required sometimes)
  2. Capacity your ability to pay back the mortgage loan. It takes into account both your income and minimum monthly payment on debts.

    Your monthly debt affects how much you can borrow. Take a look at the following chart:

    Gross Monthly Income Monthly Debt (Car Loan) Credit Card 1 (minimum payment required on unsecured debt) Credit Card 1 (minimum payment required on unsecured debt) Total Monthly Debt
    $3,200 $300 $50 $50 $400

    At 5.75% Interest Rate:

      Mortgage Amount Borrower Qualifies For
    With current debt of $400 per month $156,279
    If car loan is paid off, only $100 in minimum payments on credit card debt $207,686
  3. Credit History Your credit history shows a lender your willingness to pay past debts and is believed to be an indicator of your future credit risk.

Differences Between a Car Loan and a Lease

Before you get your next car, evaluate the costs and benefits of leasing versus buying a car.

Continue learning how to reduce debt

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

"We are really proud to recommend Consolidated Credit" Kathleen Cannon, President & CEO of United Way of Broward County. Consolidated Credit Counseling Services, Inc. is pleased to announce our partnership with the United Way as a United Way Chairman’s Circle Organization.

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Consolidated Credit is honored to receive the 2012 Excellence in Financial Literacy Education (EIFLE) Nonprofit Organization of the Year award. The EIFLE awards acknowledge innovation, dedication and the commitment of organizations that support financial literacy education worldwide. See what Consolidated Credit can do for you.

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With this amount of debt, you'd pay around $xx.xx on a DMP.

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