Dave Porter

How Does Debt Impact your Mortgage Qualifying

“I live within my means even if I have to borrow to do it.”

According to NerdWallet.com the average credit card debt per household is $7027. That’s $416 billion dollars for the country. The average auto loan is $27852 and student loan average is $56,572 or 1.55 trillion dollars nationally.

What you owe can really impact your ability to buy or refinance a home.

Per a LendingTree report, these are the averages people spend:

Auto                             493
Personal loan             458
Credit cards                244
Student loans             300
Other debt                  248 

According to Census data, the average household income in Jackson County is $56,450.

So let’s take all these numbers out for a spin. $56,450 equates to $4704 per month.

Lenders take 43% of that number or in this case, $2022. Per lending guidelines this is approximately what lenders call your debt to income ratio. All debt has to be $2022 or less, including your house payment. And that house payment is not just principal & interest but principal, interest, taxes & insurance.

Let’s look at Pat & Pat the borrowers. If we total the US average of debts (listed above) then that would total $1743, subtract that from the $2022 and that leaves only $279 for the house payment and that has to include real estate taxes, homeowners insurance, mortgage insurance (if required), and homeowner association dues if any.

For example’s sake, let’s use a rate of 3.25% (APR 3.41%) and try to figure out how much they can borrow. Assuming all the debts listed above, that doesn’t get them much of a house, less than $30,000.

But let’s say that the debts are just a car payment and credit cards, that would total $737 in debts, now we subtract that from $2022 and that leaves $1285 for the house, after taking away for taxes and insurance and mortgage insurance, that would get a borrower to about $215,000 loan.

But now let’s look at it this way, let’s say the only debt they have is the car payment. $2022-$493 =$1529 for the house payment, now they can obtain about $260,000 in a home loan.

So as you can see, the more debt you have, the less home you can afford. Give me a call, let’s run the numbers to confirm your qualifying amount.

Dave Porter NMLS # is 483876

loanDepot 344 E Main St. 

Ashland OR 97520

He has been in lending for 39 years. He is a Sales Manager for loanDepot in Southern Oregon. He can be reached at 541-708-4020 or at dporter@loanDepot.com. He is licensed to originate home loans in OR, WA, CA and ID.

State disclaimer: loanDepot.com, LLC  NMLS ID 174457. www.nmlsconsumeraccess.org Licensed by the OR Division of Finance and Corporate Securities, Mortgage Lending ML-4972.| WA: Licensed by the WA State Department of Financial Institutions, Consumer Loan Company CL-174457. | ID | CA: Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act CRMLA 4131040.

Show More

Related Articles

Check Also
Back to top button