Want the Best Mortgage Rate? Let's Talk Monthly Debt Oligations

Sonoma County Mortgage Rates are quite low. In fact locking-in a 30 year fixed rate mortgage around 4% is pretty common these days. Whether purchasing or refinancing, securing the best mortgage rate is on everyone’s mind. However, while getting the lowest rate is certainly an admirable goal, qualifying for that mortgage loan become something else entirely when you factor in the amount of income needed to offset the new house payment and the usual reoccurring monthly debt obligations that typically arise after reviewing credit and tax returns.

The lowest and best mortgage rate is going to be of no value to you as a borrower if your monthly debt obligations are beyond the comfort level of the mortgage lender lending you the money. Following are the common debt obligations that limit purchasing power, or should we say borrowing power for the purposes of securing a home loan.

Get the best mortgage rate on your next mortgage loan by making sure the following monthly debt obligations are in check

*How lenders view credit card payments: Lenders use the minimum monthly payment as reflected on the credit report they pull when qualifying you for the home loan.

You make more than the minimum monthly payment right? Well that’s great, but the lender doesn’t care.

They will be using what you are responsible for as evidenced by your credit report.

Solution: Ask the mortgage lender how much that credit card payment is affecting your ability to borrow XYZ amount of dollars. For example many credit card payments can be as little as $50 per month, but that can add up rather quickly if you have multiple credit cards each at $50 per month.

Can you pay the credit cards off in full? Consider the possibility of using part of your down payment to pay off the credit card debt. Whether you bought a home now or waited, paying off that debt frees up that cash, and gives you the control over where that money goes every month rather than having the money be predetermined by a creditor.


*How lenders view student loans: Lenders will use the minimum monthly payment on a credit report just like on credit cards. Even, if the payment is deferred, the lender will use the future payment in qualifying you for the home loan.

Solution: The best solution other than paying these debts off, if possible, would be to refinance them. Many student loans are government issued making the cost of refinancing prohibitive because the fact government issued student loans contain extremely low interest rates.


*How lenders view installment loans: Lenders  use the minimum monthly debt payments as reflected on the credit report. Installment loans are the odd ball variety of financing,  because they encompass items such as trailers, and even household items such as generators or personal motors.

Solution: Refinance them or pay them off in full. Installment loans when coupled with credit card payments and auto loans can significantly reduce the amount of money you’d otherwise be eligible to borrow and qualify for.


How Lenders View Auto Loans: Lenders will use the payment reported on your personal credit report as the minimum debt obligation for loan qualifying. Auto Loans are the most common types of larger monthly debt obligations that significantly reduce borrowing eligibility. Auto loans can range anywhere from $100 -$800 /month.

The car payment is just a lease! I don’t own the car!

Does it show up on your personal credit report? Is the monthly payment on your personal credit report?

Then the lender must account for that debt payment, lease or not.

Solution: Pay them off in full or refinance them. If it means not being able to purchase a house because you have an auto loan, can you sell the car and get a different car and still qualify for financing? Talk with a lender. Most lenders will agree that auto loan payments can affect one’s ability to borrow as much as $40,000 in loan amount.


How Lenders View Personal Loans: Lenders will use the minimum monthly payment you’re obligated to make a monthly basis as reported on…..yep you guessed it, the credit report. If you must take out a personal loan, can you do it after the close of escrow? Lenders use personal loans reported on the credit report only.

√Mortgage Tip-This goes with any monthly debt obligations that will be reported to the credit bureau’s. Take them out after you purchase or refinance. Doing so ensures you will get the best and lowest mortgage rate available as assuming credit, income and rest of your finances allow you to qualify.

Solution:  Beyond paying them off, the next best solution is to refinance the personal loans or just let the lender use it as a debt obligations when determining your ability to qualify for the mortgage loan.


How Lenders View Child Support: Lenders use the amount of payment you’re obligated to make based upon your income tax returns and/or a divorce decree or a settlement agreement or a separate child support agreement. Because these debts are revealed on the tax return, lenders will look for these when analyzing your tax returns for income and/or losses to determine loan qualifying.

Unfortunately, there isn’t really a solution to reducing or eliminating the burden of the obligation to make a timely child support payment especially when trying to qualify for mortgage loan financing, unless you have a court order.

*If you are receiving child support income, this is a good thing because that additional income can be used in consideration for helping you qualify for the loan. Just make sure the child support payments will continue through the close of escrow on the property you are purchasing or through the refinance escrow process.


How Lenders View Alimony: Lenders will use the amount provided a divorce decree or on your personal income tax return.

Similar to child support payments, this is a monthly debt obligation that will be used in determining how much mortgage loan you can qualify for. There isn’t any quick tip or tool to reduce these payments unless determined by a court order.

*Receiving alimony payments from your ex? This is income can use help you qualify for a mortgage.


How Lenders View Mortgages: Lenders don’t just take into consideration mortgage principal and interest payments, they take into consideration the principal and interest payments on whatever mortgage you presently have, along with any property taxes, monthly fire insurance obligations or homeowners association obligations you may have tied to the property plus other reoccurring debt obligations against your monthly income.  Mortgage companies will also take into consideration all properties owns in any loans tied to those properties and the equity position on each one of those properties.

Solution: Get connected with a mortgage company for a solution as there are so many different possibilities.


Follow these easy steps to securing the best mortgage rate on your next loan


√ If the monthly debt obligation can be paid off in full, do it, take control of future spending power

√Debt are paid off in full, but are not showing up that way on the credit report? Tell your mortgage company to order a credit supplement to verify which each creditor the amount of debt that is paid off.

√Consider refinancing auto loans, installment loans, other mortgage loans and personal loans in order to support qualifying on the home loan you’re trying to take out

√ Roll with the punches on some reoccurring obligations such as alimony/spousal support or child support payments-majority of the time these are nonnegotiable


Not sure where to begin or what what monthly debt to concentrate on? Your best bet is to contact a local mortgage lender who can  walk you through the ins and outs of keeping or eliminating reoccurring payments and/or debts. Learn how much you can qualify for with Sonoma County Mortgages. Get the best mortgage rate quote for your unique situation now! Want the Best Mortgage Rate? Let’s Talk Monthly Debt Obligations..















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