Do Existing Personal Loans Affect a House Purchase?

Alysia Heun — Tue, 02 Jun 2020 16:56:08 +0000

Are you planning to purchase a house but have an existing personal loan? Do you want to know if it will affect your purchase? Many individuals that are planning to buy a home are asking the same question.

It is important to be independent and have your own space where you can rest and get cozy. Being independent will also help you grow as an adult and learn to live alone without your parents.

Therefore, purchasing a house would be one of the most significant decisions you can make in your entire life. Continue reading to know the answer, so that you can properly plan your purchase according to what is best in your situation.

Will Existing Personal Loans Affect my Purchase?

An existing personal loan can affect your plan of buying a home. Whether it is a good or bad effect, may all depend on the situation. An unpaid personal loan can reduce the amount you can borrow in the future. It could also significantly affect your credit score, depending on how you handled your debt.

All of your existing debts will reflect on your credit reports, which will influence your mortgage application. Lending companies look into two things: how you handled your debts and your debt-to-income ratio.

If you miss paying on time, you will be charged with a high-interest rate, or in a worst-case scenario, you will not qualify for a mortgage. That is why, if you are planning to purchase a house in the future, make sure that you always have a good payment history with your past or current debts.

If you religiously pay your debt, it would be on your advantage. By doing so, you will have a good credit record, which can improve your chance of acquiring a home loan with reasonable interest rates and terms.

How to Boost Your Chances for A Home Loan

Your chances for a home loan approval will depend on your credit score and the lender. Eligibility may vary in each lender. Some may still let you borrow money even if you have a low credit score, while others may not lend you money at all.

To increase your chances of being approved on a home loan, you should pay your existing debts on time. Lenders now have access to your information with the help of Comprehensive Credit Reporting. They can quickly check your financial background, especially your credit history.

Maintain a good record by paying your debts on time. Not only can damage your records, but also your credit cards if ever you own one. Advance payments are also suitable for your record. If you have some spare cash, it would be better to make any advance payment for it to reflect on your credit history.

You can also finish up your loan quickly by making advance payments. Once you completely paid your loan, it will no longer be a liability that might hinder your home loan. If you want to apply for another loan, it would be best to clear out your current debts.

Other

Student Loans

If you still have an unpaid student loan, you should complete your payment as soon as possible. If you have a bad payment history on your student loan, expect it to hurt your credit history.

Student loans take decades to pay off due to its repayment terms. You can use this loan to your advantage. Long term loans can give you a high credit score when you pay it on time.

But you have to remember that a student loan will affect your debt ratio, which will affect your capability to afford a mortgage. If you had a high student loan amount, your rate would also be higher.

The only way you can improve your ratio is to have a high monthly income where the lending company can refer to during your application. By having a high salary, the numbers itself can convince them to grant you a loan.

Auto Loans

Auto loans can positively affect your credit history. Unlike student loans, car loans are secured loans where the lender can reclaim the car in the event of non-payment. However, you must pay off your car loan if you want a positive reflection on your credit history.

You will also likely be approved of a mortgage once you already have a good history of a car loan. This type of loan is harder to acquire than a credit card, which only proves that you are eligible for a higher loan option if you have good credit with it.

Payday Loans

A payday loan won’t show up on your credit history, but it may hurt your future credits when it’s a defaulted loan. The interest rates on payday loans are high since it is an unsecured loan, meaning the lender has no collateral to cling on when you fail to pay your debt.

Takeaway

All debts under your name will reflect on your credit history. Being careful to not apply for unnecessary loans and paying your current loans on time, would positively affect your future loan plans, especially a home loan to aid you in your home purchase.

The post Do Existing Personal Loans Affect a House Purchase? appeared first on Blog | �ʹ��app.

When Should I Refinance My Mortgage?

Alysia Heun — Wed, 14 Nov 2018 19:32:15 +0000

Refinancing your mortgage could be a smart financial move. It largely depends on timing.

But how do you know when the time is right for you to refinance?

First: Do you plan to own the home much longer?

Refinancing your loan doesn’t happen without a few fees. The good news is that most of these fees will simply be rolled into your new loan, so you won’t need to pay a lump sum out of pocket.

But if you’re planning to sell the home in a few years, you may not hold the mortgage long enough to recover these fees. Refinancing really only makes sense if you plan to own the home for the next several years.

Assuming that you plan to own the home for a while, refinancing your mortgage can save you a lot of money in the long-term. It could also lower your monthly payment. And it could even help you tap into your home equity to finance another project.

Here are three key times when you should strongly consider refinancing your mortgage.

1. When you can reduce your interest rate by 1% or more

If you’ve held your current mortgage since before the 2009 recession, your interest rate is probably much higher than today’s rates. And you’re probably paying way too much in interest.

Refinancing to get today’s lower interest rates could reduce your monthly payments and save you a fortune over the term of your loan.

Additionally, if your credit score has improved substantially since you applied for your current loan, you may qualify for a lower rate now than you could at that time.

Generally speaking, if you can reduce your interest rate by 1% or more, it is probably a good time to refinance. That 1% makes sure you’re saving enough money to recover the previously mentioned fees.

2. When it makes sense to change your ARM for a conventional mortgage

Interest rates are on the rise. If you currently have an ARM (Adjustable Rate Mortgage), your mortgage rate will be increasing as well.

To lock in today’s low rates, you can refinance to a traditional mortgage with a fixed rate. Fixed rates are often slightly higher than ARM rates, but they come with the assurance that your mortgage interest rate will not rise with the national interest rate increases.

If you currently have an ARM, seriously consider refinancing to a fixed rate mortgage before interest rates get much higher.

3. When you want to use your home equity

Do you have a fair amount of equity in your home? You may be able to use your home equity to finance other projects.

This is riskier than refinancing for a lower (or fixed) interest rate because this involves taking on additional debt, with your home as the collateral. But if you need funds for something like starting your own business or paying off high-interest debts, your equity could provide the funding you need.

Mortgage interest rates are on the rise, but they’re still low. If you can lower your interest rate, lock in a long-term low rate, or take advantage of your home equity, act quickly to refinance your mortgage before rates increase.

This post is intended for informational purposes only and should not be taken as professional advice. The point of view and opinions expressed in this post are those of the author and do not necessarily reflect the position of �ʹ��app International. This post was written by Michelle Clardie. Michelle is a professional real estate blogger, specializing in ghostwriting Realtor® blogs. Her engaging content helps real estate agents become more visible online, generate more qualified leads, and increase their revenues. You can learn more at www.michelleclardie.com.

The post When Should I Refinance My Mortgage? appeared first on Blog | �ʹ��app.