Will I Get a Mortgage If I'm Already in Debt?

by Maurie Backman | Updated July 19, 2021 - First published on Dec. 3, 2020

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Couple sitting at wooden table discussing paperwork with advisor.

Image source: Getty Images

Debt won't stop you getting a mortgage -- as long as you're not carrying more than you can handle.

Debt won't stop you getting a mortgage -- as long as you don't have more than you can handle.

Debt is common. Many consumers have credit card debt, an auto loan, or other form of debt.

If you're in debt and looking to buy a home, you may be wondering whether your debt will hurt your chances of getting a mortgage. The good news: You can get a home loan while already carrying debt. However, whether you qualify will depend on several factors related to that debt.

And remember, buying a house isn't some all-important milestone you need to reach by a certain age or season of life. It's okay if you decide to wait a couple years to pay down debt, raise your credit score, or get a better job before buying a house. Everyone's journey to home ownership is different, so decide to buy a house when it's the best decision for you and your family.

Here are some questions to ask before applying for a mortgage.

How much debt do you have relative to your income?

One major factor that mortgage lenders look at when evaluating applicants is their debt-to-income ratio. This is the amount of debt you have relative to your income. The higher this number, the lower your chances of getting approved.

You can calculate your own debt-to-income ratio by dividing your debt by your income, then multiplying the decimal you get by 100.

Generally speaking, you won't get approved for a mortgage if your debt-to-income ratio is above 43% (if the number you got using the above equation is 43 or higher, it's too high).

If you're eager to buy a home soon but have an unfavorable debt-to-income ratio, your best bet is to pay off existing debt. (It's okay if that process takes a couple years.) If that's not possible, you can work on boosting your income or ask someone to be a co-borrower on your loan.

What does your credit score look like?

Another major factor in qualifying for a mortgage is your credit score.

If you regularly make your debt payments on time, you'll have a strong payment history. And that's the single most important factor in calculating your credit score.

On the other hand, if you’re constantly missing payments or paying your debt late, your credit score will take a hit (and you might not be ready to add a mortgage to your list of monthly payments).

There are many other reasons your credit score might not be perfect. Take a look at our guide to improving your credit score if you're ready for a mortgage and want to raise your score.

Make sure you can swing that mortgage

Being in debt won't automatically prevent you from getting a mortgage. But if you're already on the hook for other obligations, make sure you can really afford a mortgage -- as well as property taxes, homeowners insurance, and maintenance -- before attempting to buy a home. You can start by using our mortgage calculator to estimate your monthly mortgage payments. Then, decide whether those payments fit your current budget.

If too much of your income is eaten up by debt, you might struggle to keep up with your housing costs, putting you at risk of foreclosure. You may be better off paying down some of that debt and then applying for a mortgage when you're in a stronger financial position.

If you can't get a mortgage right now, don't worry -- you're not alone. There are plenty of others who are waiting for the right time to get a mortgage. Getting a mortgage when you're ready is always a better decision than rushing in when you're not.

The Ascent's Best Mortgage Lender of 2022

Mortgage rates are at their highest level in years — and expected to keep rising. It is more important than ever to check your rates with multiple lenders to secure the best rate possible while minimizing fees. Even a small difference in your rate could shave hundreds off your monthly payment.

That is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, with no hard credit check, and lock your rate at any time. Another plus? They don’t charge origination or lender fees (which can be as high as 2% of the loan amount for some lenders).

Read our free review

About the Author