Post # 1
So DH and I just discussed this morning the possibility of looking in to buying an apartment instead of renting. We love where we are right now, but we both feel like we are “wasting” money on rent and that it might be a good idea to start looking to buy. Has anyone had any experience with this? I have good credit (high 700s) as does DH but we have about $8,000 worth of credit card debt that we pay more than the minimum on each month. I know noone can give me an accurate answer just wondering if there’s even a point in applying for a pre approval or will we get shot down right away?
Post # 2
It depends on your DTI (debt to income) ratio. Lenders will want you to only have a certain percentage of your income that goes to debt (in Canada I believe it’s 40%). That includes credit cards, car loans, student loans, etc.
So it will depend on how much of your income goes to paying off your debts (I believe they calculate it based on the monthly minimum payment). You might still be able to get one, but not as much as you want…
Post # 3
1112bride: Without knowing your income and other debts, no one will be able to say for sure, but I don’t think 8k is such an insane amount of credit card debt that it would preclude you from getting a mortgage. However, if your concern is “wasting” money- why don’t you pay off the credit card debt first? The interest you are paying on that each month, truly is a waste of money. It irks me when people call rent a waste of money, because shelter is one of the basic necessities for life. Granted, that’s basic shelter, not a large or luxury apartment. But, even high rent on a nice place is no more a waste than any other luxury like going out to dinner, cable tv or new clothes. It’s also worth noting that unless you pay cash for a house, there will still be considerable amounts of money that will go towards interest, possibly PMI if you don’t have a sufficient downpayment, etc
Post # 4
- Wedding: April 2014 - Italian Villa
1112bride: Assuming you have sufficient income, $8k in debt will not hurt you. It will affect the amount of house you can afford, because as PP said, your total monthly DTI ratio cannot exceed a certain percentage (it varys from lender to lender and from loan type to loan type, but ususally is about 50-something %). There are 2 kinds of DTI ratios (front end and back end). The front end (unless I’m mixing them up) is just the mortgage (PITI payment- Principle, Interest, Taxes, and Insurance) in relation to your income and it cannot exceed the mid 30’s to 40’s. (the back end is your total DTI with all monthly payments, like your credit card, etc).
I used to work for a mortgage originator, so let me know if you have more questions.
Post # 5
1112bride: Like other PPs said, it’s impossible to know whether or not you’ll get pre-approved without more information. That being said, $8000 in credit card debt is not going to cause you to be automatically declined, so I would encourage you to speak to a lender. They’ll be able to take down your information and give you a better idea of where you sit when it comes to getting a mortgage. Best of luck!
Post # 6
I had cc debt and got a mortgage without any problems. But I also had a good credit score that helped. GOod luck!!
Post # 7
I would take the money you’re intending to use for a down payment on a house and use it to pay off your credit card debt.
Post # 8
My fiance and I have pretty good credit scores. We both have credit card debt and I have student loan debt. We didn’t do a down payment on a house and we got approved for a pretty awesome mortgage. We knew what we could afford monthly, not what everyone else suggested. We kind of went “against the fray” and it worked out awesome for us. We were sick of wasting money on rent for a crappy apartment. We love being homeowners!
Post # 9
Agree with the previous poster. With 8k of credit card debt, you are wasting probably close to $1k a year on interest, which may be a lot more than whatever you are wasting on renting rather than buying!
Post # 10
It is hard to tell just based on the information you provided but I would pay off the debt first so you aren’t wasting money on interest. I don’t think that rent is wasted money, you need somewhere to live either way and sometimes you aren’t always in the best position to buy a house.
They will consider the lower of your scores, so his bad scores will affect the rate on your mortgage.
Post # 11
If you have enough money for a down payment, why aren’t you paying off the credit card debt first? Or if you’re able to save for a down payment each month, use that money to get rid of the debt? Agree with PPs that it’s worse to waste money on the credit card interest than on renting an apartment.
Post # 12
I agree with PP that the interest on your credit cards is more wasteful than renting. Pay the debt off first, then buy your home.