People strive to purchase investments—be it a car, a house, and everything in between—in one fell swoop, but the common reality for most is to pay bigger expenses through loans. That’s why your credit score and history play pivotal roles in your mortgage applications down the road since it reveals your sense of financial responsibility and capability.
Dreaming of unlocking a new home where you and your growing family can settle down often involves getting a mortgage, but financial factors such as your personal loans can make or mar the lender’s view of your security as a borrower.
Seeing as it’s important to set a positive impression so you can obtain a mortgage loan with competitive interest rates, you should know that something like personal loans can have a big impact on the affordability of your future mortgage application.
Why Does a Personal Loan Affect Other Finances Like Your Mortgage?
A personal loan is a perennial choice for borrowers since it allows them to get the full amount upfront, which can help cover unexpected expenses or emergencies. Since they’re unsecured loans that require no collateral, it typically comes with higher interest rates, which can compromise your mortgage application.
Lenders need to consider your debt-to-income ratio, so when you’re already paying for a personal loan with a high interest rate, your ability to meet monthly mortgage payments on time seems jeopardized.
After all, paying for something as massive as a mortgage loan can take decades for many people, so the fact that you also have other financial obligations to juggle increases your risk as a borrower. Consequently, missing out on payments on your personal loan can bump up the interest rate on your mortgage loan, resulting in a double whammy to your finances.
What are the Other Factors that Impact Your Mortgage?
Any other debts you have can influence your mortgage applications, particularly since it changes your debt-to-income ratio. This is a critical factor for lenders since a low DTI means your personal loans won’t be too big of a difference when you apply for another loan. On the other hand, a high DTI means you won’t be able to afford another loan, resulting in lenders denying your application.
The Bottom Line: Increasing the Likelihood of Getting Approved for a Mortgage Loan on Top of Paying Your Personal Loan
Balancing a personal loan on top of a mortgage loan can be challenging, but upholding an upstanding credit history can ease the burden on your debts moving forward. While it’s easier said than done, it’s crucial to make timely payments if you want to boost your chances of qualifying for a mortgage loan at a rate that you can afford for years to come.
Why Choose Athens Finance For Your Personal Loans in Athens, AL?
Finding and obtaining the best loan that suits your financial situation can be tricky for anyone, even for experienced borrowers. Athens Finance can help simplify the process as our lenders offer various personal loan sizes to meet different needs, making it possible to get good rates on a personal loan even with bad credits.
We ensure the loan process is as stress-free as possible, so you can move forward with an affordable payment plan. Your comfort and convenience are our priority, so get in touch with us today at 256-291-4862 and see how our services can make loan shopping easier.