Can you pay off debt when buying a house to qualify for more?

Posted on September 29, 2014 by Ray Williams (NMLS #216267).

A very interesting thing is happening. It reminds me of when I bought my first home. This is how that went down. I had sufficient money to make a 5% down payment on a house saved. However, I also had some consumer debt (car, credit cards….). Now one might say putting less down on a house is ill-advised. But let’s break this apart. Had I put the money down my mortgage payment would have been about $100 less per month that is closed at per month (by borrowing more money).

However, paying off the debt got rid of about $400/month in consumer debt. Net gain was $300 less per month in personal monthly expense after I bought a house. Now I wasn’t concerned about credit scores, as I knew mine were pretty high already. I was concerned about qualifying for a house I would love long-term. I knew I wouldn’t go back out and take more debt on either. So now I have owned the house for 9 years, it is a rental, and is a few years into a 20 year mortgage. The original mortgage I had ended up being in place for about 4 years. So in the grand scheme the interest rate wasn’t of optimal importance either because I kept the mortgage only 4 years as well.

What  makes sense for you? With rising home costs in Denver, and wages not keeping pace this is something you should be discussing early with your lender.

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