Current Credit Balances and Your Mortgage

Summary

Your credit score is influenced by your current account balances.

Mortgage lenders will use your credit score as a critical component in deciding what to do with your mortgage application.

A better credit score generally means a better interest rate and a lower monthly payment.

Basics

Your current credit balances are measured by:

• maximum available credit

• current balance

• minimum monthly payment

Maximum Available Credit

Your individual credit lines are listed on your credit report.

These credit lines include credit cards, mortgages, car loans, and other forms of credit.

Listed on the report is the maximum available credit. This limit can be updated on your credit report as your credit limits change.

Current Balance

Your credit report also lists your recent balance on individual lines of credit.

This may be out of date, and you may be able to submit to a lender documentation showing that you have paid down or paid off some debt. This may help your application.

Minimum Monthly Payment

The credit report will usually also list your minimum monthly payment. These payments will be added together to figure out your monthly debt burden. A lender will add the debt burden of your proposed mortgage loan to see if you qualify for a loan.

The total debt burden is compared to your monthly pretax income. You may qualify for a loan with some lenders and not with others. Also, lenders have different guidelines for different loan programs, so you may be eligible for one type of loan and not another with the same lender.