The truth of the matter is: you can’t buy the things you need in life without some debt. You can’t buy a house, a car, or any other major investments, without a history of credit – good or bad. It’s important you recognize the debt that can help you and make you a stronger candidate for financing, and poor debt that’ll hurt you in the long-run.
- Good Debt = Debt incurred based on needs, rather than wants.
This can be student loans, previous mortgage loans, car-debt, etc. This debt shows your responsibility and dependability to finance the amenities you and your family needs. Debt incurred to better yourself, like student loans, also promotes self-improvement and makes you more likely to earn a higher, more stable wage in the future. So when you’re applying for a mortgage, don’t be afraid to include the necessary debt you have, this can actually better your chances of qualifying.
- Bad Debt = Debt incurred based on wants, rather than needs.
This can best be seen with extensive credit debt or any debt that carries a high-interest rate with a short-term value period. Those expensive outfits that are out of fashion within a few months? Bad debt. Unpaid store credit cards? Bad debt. Payday or Cash Advance Loans? Bad debt. This debt doesn’t show you reliability as a borrower, but rather your irrationality and recklessness. Knowing this, try to clear up as much as bad debt before you attempt to get a mortgage. Speak with your mortgage expert about your current circumstance and see what you can do to put yourself and your finances in the best light.
Whether you have good debt or bad debt, you’ll get a mortgage at Choice Mortgage Bank, Inc. We work with numerous families to get them the home they need. If you’re ready to join the list of hundreds of happy, returning customers, schedule your first consultation today!