Other Types of Debt

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blog-author-clayjeffreys2
We conclude this series on debt and its impact when buying a home by focusing on some items that wouldn’t warrant an entire post on the topic. Let’s begin with one that almost everyone uses.

  • Credit Card Debt: some people think that credit card debt balances are used when qualifying to buy a home. When it comes to debt, underwriting only uses the minimum monthly payment. Often, credit card debt impacts credit scores themselves with too many cards, too many high balance cards, or maxed out credit cards. In terms of debt analysis, only the minimum payment is used.
  • Child Support: this is treated like an installment debt. You owe $x.xx amount over X number of months. When underwriting, is gets treated like a car loan.
  • Alimony: See above. If coming to an end within the next few months, we can ask the underwriter to ignore the debt since this court ordered obligation for underwriting purposes. The request can be denied, but if coming to an end in the next few months, child support/alimony payments won’t have an impact on making the new mortgage payment. Worst case, we wait a few months for child support/alimony payments to end.
  • Tax Liens with a payment plan: if you owe back taxes, can document an agreed upon payment plan, and then document three months of making the on-time payments of the payment plan, then this debt would be treated like an installment debt. Again, you owe $x.xx amount and will pay it back over X number of months. The key is having the documented proof of the approved payment plan AND three months of payments have been made.
  • Tax Liens without a payment plan: depending on the loan program, this may need to be paid in full prior to buying a home

Over the last several weeks, we have looked at debt and how it impacts you when buying a home. Whether buying a new home while keeping your current home, have deferred student loans, lots of credit card debt, lease a car, etc., each one of these topics have their own set of underwriting guidelines. It is imperative to work with a professional who is aware of these factors and can help plan accordingly. The last thing anyone wants is to be under contract to buy a new home, and deferred student loans get in the way.

If buying in the state of Georgia, I’m happy to help. My contact information is at the bottom of this page. Get in touch with me, and we’ll get the prequalification process underway!

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