Debt Impact On Mortgage Applications

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Debt and home loans , what you need to pay off and what can stay . Can you still buy a house if you've got a car loan , a credit card or afterpay ? Let's break it down . Welcome back to that Home Loan Hub . I'm Zibunisa Olimova , your mortgage advisor , mom of four and your personal hype woman for all things finance , and first , home buying . Today we are going deep on something that stresses a lot of people out Debt , specifically , what kind of debt you can get away with when applying for a mortgage and what you need to get rid of . Yesterday Because , spoiler alert , not all debt is created equal why lenders care about your debt , you may ask .

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When you apply for a mortgage , the lender isn't just looking at your income and your deposit . They're also asking do you have car loans , credit cards , buy now , pay later , accounts like Afterpay , zip Layby , personal loans or overdrafts ? And it's not because they want to judge you . It's because every dollar going to existing debt reduces how much you can borrow . It's because every dollar going to existing debt reduces how much you can borrow . It's all about servicing whether you can afford the mortgage on top of your current repayments . Now how did it impact your borrowing power ? Let's say you're earning $90,000 a year and you've got $15,000

Ryan & Mel's Success Story

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car loan , a credit card with a $5,000 limit and an afterpay balance of $800 . Thanks all those Nike shoes . Even if you make all your repayments on time , the bank will factor in monthly repayments on each of those deeds and that can reduce your borrowing power by tens of thousands . Even worse , the $5,000 credit card that you never use , the bank assumes it's maxed . Yep , there it says limit , not balance .

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Now let's look into the case study . Let me tell you about Ryan and Mel . They came to me with $70,000 deposit , stable income and big dreams , but between a $25,000 car loan and the two credit cards was a combined $10,000 credit card limit . Their borrowing power was not where it needed to be . I gave them a plan . We decided that to clear one credit card completely would be a good start , lower the other credit card limit down to a000 and refinanced the car loan to a lower repayment plan . Six weeks later we applied Boom . Their borrowing power increased by $92,000 . That was the difference between a no-go and getting pre-approved for their first home in Port-au-Rouge .

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What debt is a deal breaker ? Here's a quick guide to what lenders love and what makes them twitch . Now get a pen . Let's go through the red flags .

Red Flags vs Green Zones

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Red flags payday loans , missed or late payments , high interest rate finance deals like Harvey Norman , qcats , etc . And too many active buy now , pay later accounts . Neutral still affects borrowing low interest rate car loans , credit cards with low limits and student loans , especially in New Zealand . They're deducted automatically , but still count .

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Green zone , clean repayment history , low or no consumer debt and reducing limits before you apply . Now you might ask do you need to be debt-free to buy ? The quick answer is no . You don't need to be squeaky clean , but you do need to be strategic . A well-managed car loan or a credit card won't necessarily

Strategic Debt Management Tips

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stop you from getting approved . But having five buy now , pay later accounts , a maxed out card and a car loan with four years left , that's going to limit your options . This is where working with a mortgage advisor helps . We can tell you what's hurting your application and whether it's worth clearing or not .

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Now I've got some tips for you . I hope you still got that piece of paper and a pen . Get your credit report early . Check for surprises . Pay down small balances , especially buy now , pay later activities and short-term finance . Lower your credit card limits even if you don't use them . Stop applying for new loans . No new cars , no just-in-case credit cards . And talk to me first before you shuffle debt or consolidate anything . Now , final thoughts from me . Debt doesn't qualify you from buying a home , but it does shape the size of the home loan you can get . So if you're serious about getting into the market this year , let's get your debt in check , clean up your finances and build a strategy that works with your situation , not against it . Thanks for joining me today on that Home Loan Hub . If you've got debt and you're not sure where you stand , send me a message . There is no judgment , just strategy . Hit , follow

Episode Wrap-up & Invitation

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. Share this episode with a friend who thinks they're too deep in debt to buy , and remember one good plan can change everything . Catch you next week .