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How to Qualify for a Mortgage While Carrying Credit Card Debt

August 20, 2025 by Kay Monigold

Many potential homebuyers worry that carrying credit card debt will prevent them from qualifying for a mortgage. While it is true that lenders carefully evaluate your financial profile, having credit card balances does not automatically disqualify you. By understanding how lenders view debt, taking strategic steps to improve your application, and choosing the right mortgage program, you can still achieve your goal of homeownership.

Understand Your Debt-to-Income Ratio (DTI)
One of the most important factors lenders review is your debt-to-income ratio. This is the percentage of your gross monthly income that goes toward debt payments, including your future mortgage. A lower DTI signals that you have more income available to manage housing costs. While requirements vary, many lenders prefer a DTI of 43 percent or lower. If your ratio is higher, reducing your credit card balances can make a significant difference.

Check and Improve Your Credit Score
Your credit score reflects how you manage debt, and it plays a major role in both mortgage approval and interest rate offers. Making on-time payments, keeping balances low relative to your credit limits, and avoiding new debt in the months before applying can all help improve your score. Even small improvements in your score can result in better loan terms and lower monthly payments.

Consider Paying Down High-Interest Debt First
Not all debt impacts your mortgage application equally. High-interest credit card debt can weigh more heavily on your monthly obligations. Paying down or paying off these balances before you apply can reduce your DTI, improve your credit score, and strengthen your overall financial profile.

Explore Different Mortgage Programs
Certain loan programs may be more flexible for buyers carrying credit card debt. FHA loans, for example, have more lenient credit score requirements and allow for higher DTIs in some cases. VA loans for eligible veterans and service members can also be more forgiving. A knowledgeable mortgage professional can help match you with the program that best fits your situation.

Show Stable Income and Strong Employment History
Lenders want to see that you have a reliable income stream to manage both your mortgage and existing debt. Providing documentation of steady employment over the past two years can help offset concerns about your current debt load. If you have recently received a raise or secured a higher-paying position, be sure to include that information in your application.

Avoid New Debt Before Closing
Once you begin the mortgage application process, avoid making large purchases on credit or opening new accounts. Even small changes to your credit report or DTI can impact your loan approval or terms. Staying financially consistent until your mortgage closes is key.

Work With a Mortgage Professional Early
An experienced mortgage originator can review your financial profile, help you create a plan to address any challenges, and guide you toward a loan program that fits your needs. They can also help you understand exactly how much you can afford so you shop for homes with confidence.

Carrying credit card debt may require some extra preparation, but it does not mean homeownership is out of reach. By focusing on your DTI, credit score, and overall financial stability, you can position yourself for mortgage approval and move forward toward owning the home you have been dreaming of.

Filed Under: Home Buyer Tips Tagged With: Credit Card Debt, Homeownership, Obtaining a Mortgage

The Mortgage Options That Make It Possible to Buy a Fixer-Upper

August 19, 2025 by Kay Monigold

Buying a fixer-upper can be an exciting way to get into a desirable neighborhood at a lower price point, while also creating a home that reflects your style and needs. However, financing a property that needs significant repairs can be challenging if you are only looking at traditional mortgage products. The good news is there are several mortgage options designed specifically for buyers who are ready to take on a renovation project. Understanding these options can help you choose the right path to turn a home with potential into your dream property.

FHA 203(k) Rehabilitation Loan
The FHA 203(k) loan is a popular choice for buyers who want to purchase a fixer-upper and finance both the purchase price and the renovation costs in a single mortgage. Backed by the Federal Housing Administration, this program has more flexible credit requirements than many conventional loans. There are two types of 203(k) loans: the Limited 203(k) for smaller projects such as replacing flooring or appliances, and the Standard 203(k) for major renovations like structural repairs or room additions.

Fannie Mae HomeStyle Renovation Loan
The Fannie Mae HomeStyle Renovation loan allows you to borrow based on the  as-completed  value of the home, which is the estimated value after the renovations are finished. This loan can be used for a wide range of improvements, including luxury upgrades that FHA loans do not typically cover. Since it is a conventional loan, you may need a higher credit score than with FHA, but it offers competitive interest rates and can be used for primary residences, second homes, and investment properties.

Freddie Mac CHOICERenovation Loan
The Freddie Mac CHOICERenovation loan is another conventional option that can be used for repairs, upgrades, or even renovations to help a property withstand natural disasters. Like the HomeStyle loan, it is based on the post-renovation value of the property. It can also be paired with certain affordable lending programs to make the upfront costs more manageable.

VA Renovation Loan
For eligible veterans, service members, and certain surviving spouses, the VA Renovation Loan provides an opportunity to finance both the home purchase and repairs under the benefits of the VA loan program. This means no down payment in most cases and favorable terms. However, not all lenders offer this product, and the renovation work must be completed by VA-approved contractors.

Why Renovation Loans Make Sense
Renovation loans not only make it possible to buy a home that might otherwise be out of reach, they also give you the flexibility to create a space tailored to your vision. By rolling the cost of improvements into your mortgage, you avoid the need for multiple loans or high-interest credit cards to pay for repairs. In addition, the value of the home often increases after renovations are completed, which can improve your equity position more quickly.

If you have found a home with good bones and the right location but it needs some work, one of these renovation loan options could help you transform it into the home you have always wanted. The key is to work with a mortgage professional who understands the specific requirements of each program and can guide you toward the option that best fits your needs and budget.

Filed Under: Mortgage Tips Tagged With: Fixer-Upper, Mortgage Options, Renovation Loans

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Kay MonigoldKay Monigold
Owner/Mortgage Broker/Residential Mortgage Loan Originator
NMLS#1086176

Steven LoweSteven P Lowe, Sr
Residential Mortgage Loan Originator
NMLS #1085638

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