If you’re feeling like you’re drowning in debt, know two things: “what is dead may never die,” and not all loans are necessarily a bad thing, as you can use them to prove you’re capable of making payments.
Debt comes in two forms: secured and unsecured. When you’re shopping for a mortgage, your credit score is a pretty big deal; that number can make or break your mortgage approval and ultimately determine whether you get your dream home. But before you analyze your credit score it’s important to analyze at how your existing debt affects your credit score.
- Auto Loans – Auto loans are secured debt because if you don’t pay your monthly dues, the lender can repossess your car. Auto loans are harder to get than credit cards, so some mortgage companies may look favorably upon you.
- Existing Mortgage Loans – These are the classic example of secured loans because the bank has the ultimate collateral: your house. Mortgages, when paid on time, are great for your credit score. Missed payments on previous mortgages, however, might make your new lender nervous about giving you the mortgage.
- Student Loans – Student loans are considered unsecured debt because it’s not really possible to reach into your head and erase everything you learned in school (unless you happen to work for the Men in Black). Because student loans often take a decade or more to pay off, so a large student loan may help you qualify for a mortgage.
If you’re ready to talk to a mortgage lender about becoming a homeowner, contact me, Andraya Coulter. I serve the Bay Area and the entire states of California and Texas with quality home loans and dedicated service. I’m here to be your partner as you buy your first home. Call me today!