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Getting a home loan.. Just a question

We're getting ready to buy our first house after being married for 4 years and I had a question. Right now, we are in debt but it will be paid off by the end of March. Our lease is up in May, so between March and May, we have to buy a home. My question was, could I go ahead and get approved for a loan now, even though I have debt? OR should I wait until that debt is paid off so it looks like we aren't in debt. Also, would it hurt, if I went to get approved and either didn't or couldn't finance as much as we needed and then went back to do it again in March? Help me ! I have no idea what I'm doing

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Anonymous

Asked by Anonymous at 2:01 PM on Jan. 6, 2010 in Just for Fun

Answers (9)
  • Wait until your debt is paid off, then apply for the loan (Be prepared to show proof that the debt is paid in full when you apply, sometimes it takes awhile to show on the credit bureaus.) Anytime your credit is checked it hurts your score, so it's not the best idea to get approved twice, if that makes sense?
    Scuba

    Answer by Scuba at 2:11 PM on Jan. 6, 2010

  • Thank you!! That's what I thought too.. Just wanted to make sure! I just hate having to wait until the last minute to do it.. but I think in this case, i'll have to!
    Anonymous

    Answer by Anonymous at 2:14 PM on Jan. 6, 2010

  • It really depends on how much debt you have, how it affects your credit score, and how it impacts the amount you qualify for (even with debt you may have excellent credit and qualify to borrow more than you need). If it is just a small debt (which I assume it is since you expect to pay it off very soon), then I would go ahead and talk to the bank. If you haven't already pull your credit score from the 3 major reporting agencies and see how it looks. You are going to need money for a down payment and also to cover closing costs, so if paying the debt off completely leaves you short of cash it might be better to hang onto the cash until after you close on a new house. Also, finding and buying a home takes time, so you really can't wait until the last minute to start.
    Anonymous

    Answer by Anonymous at 2:20 PM on Jan. 6, 2010

  • If I can add too... Be sure that after you pay off your debt that you get final statements saying that that debt has been paid off as well as confirmation numbers. You can also speed up clearing your credit up some by going to all three bureaus: Transunion, Experian, and Equifax. You can purchase your reports through them, it helps to just do this through all three of them so that you clear them all up.After you purchase the reports go through the website and file disputes on the debt that is listed, and make sure that you state the paid in full confirmation number number in each dispute. it will cost between $45-$60 but if they have a dispute it will usually clear it off your report faster then if the actual debt collecting company tried to report it. We are in the process of purchasing a new home, and we had to do this for my husbands credit. Because the debt company never had accounts removed after they were paid a year ago
    BabyBeans0506

    Answer by BabyBeans0506 at 2:23 PM on Jan. 6, 2010

  • As long as your debt isn't overdue (i.e. collection agency, etc.) and isn't a large amount of money, then whether or not you pay it off won't make a ton of difference. Your credit score is reflective of your credit history. If you need the money for down payments, etc...hang onto the cash. When they go to approve you for a loan, they'll be looking at your credit score and your debt to credit ratio (debt includes balances on credit cards, car loans, school loans, mortgages, etc. - credit includes available credit on credit cards, lines of credit, ). This is important...if your debt is on a credit card....don't close the credit card account. In fact, don't close out any of your credit cards. Keep your balances low and your available credit the same and your debt to credit ratio will look really good. Don't attempt to open new credit cards to make it look better though because anything opened recently will cause red flags.
    ANGIE409

    Answer by ANGIE409 at 2:33 PM on Jan. 6, 2010

  • You also want to make sure you get your credit reports and make sure you don't have anything on them that isn't supposed to be there. Get those things resolved before applying for your loan. As for getting pre-approved, as long as you're the one requesting your credit report and you aren't doing it more than 3x in a year...it won't hurt your credit score at all. Feel fee to apply now and apply again later if needed. (Often a bank can pre-qualify you too...which means they can give you a ball park idea of what you qualify for based on the information you give).
    ANGIE409

    Answer by ANGIE409 at 2:36 PM on Jan. 6, 2010

  • Keep your balances low and your available credit the same and your debt to credit ratio will look really good.
    --------------------------------------
    Uhm, you don't want a "debt to credit ratio". You want your debt down lower so you have a good "debt to income ratio". Credit cards are still considered debt.
    Anonymous

    Answer by Anonymous at 2:47 PM on Jan. 6, 2010

  • Wait and also until you saved up at 10K.
    Anonymous

    Answer by Anonymous at 3:12 PM on Jan. 6, 2010

  • When we bought our first house my husband and I were both 21, he had a credit score of 741 and I had one of 811 (my mom took out a credit card in my name when I was 13 and paid it off every month to boost my credit score). We were actually penalized by a few companies for not having ANY debt. I couldn't believe it! I was so hot! Here we both had worked hard and paid off our cars, had great credit scores and were being penalized for NOT being in debt. We dropped those companies and went somewhere else and got a good loan.
    kc932

    Answer by kc932 at 4:56 PM on Jan. 6, 2010

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