Control Your Debts, Improve Your Credit, Receive Florida Home Loan Approval

There are many factors to consider as you apply for a Florida home loan. One of them is your credit score. As counterproductive as it may sound, the fact of the financial matter is that you need to have a handful of outstanding debts in order to make timely payment and prove to lenders that you have a reliable credit history.

However, BE CAREFUL. Possessing too much debt can have a negative affect on your credit rating; and, therefore, make it more difficult to be approved for any Florida home loans.
It’s a fine fiscal line to walk.

Aside from this score, lenders will look at you “debt-to-income ratio,” which is the ratio between how much debt you have to the amount of income you make. For example, if you make $50,000 and you have $10,000 in debt (credit cards, personal loans, etc.), your debt-to-income ratio would be 20 percent.

Those looking for an affordable, government-assisted Florida home loan should take note: The Federal Housing Administration (FHA) requires that your monthly mortgage payment, combined with your non-housing debts, do not exceed 41 percent. Unfortunately, the credit reporting bureaus don’t reveal how they calculate credit scores, so it’s hard to say exactly how much debt is too much. But if your debt-to-income ratio exceeds 41 percent, you need to make some changes.

Improve your credit score for the sake of receiving the lowest possible Florida home loan rates. Here’s how:

Closing your credit card accounts is NOT the answer for those with many balances. This could actually have the opposite effect and lower your credit score even further. Closing an account does not remove it from your report and the debt - unless paid off - would still appear on your report.

The way to start raising your credit score is to pay off your debt. It’s not a novel concept, but it’s a vital one. As previously mentioned, you’ll want to maintain some revolving debt, while paying these bills on time to prove that you’re a trustworthy borrower. But you’ll know your payments are too great as your rating drops.

The bottom line is that those hoping to buy a home or to refinance a Florida home loan should take some time to pay off as much debt as you can before applying. Raising your credit will assure you of a lower interest rates and more manageable Florida home loan payments.