Planning to buy? Good Debt Vs. Bad Debt!

Whether or not your planning to buy now or anytime in the future it is really important to consider what type of debt is good for your qualifying for the purchase of your new home. Always contact a mortgage broker first if you don't know.  Cannot hurt.  Advice is free and can make all the difference for the future. I was recently approached by a client whom is planning to purchase a new home.  He came to me to ensure before he listed his current house he would be in a financial position to spend more on a new house.  Throughout the initial stages of the application I realized that the clients had a unsecured line of credit with a balance of $55,000.  They used the line of credit to purchase a vehicle which absolutely makes sense from an interest rate point of view.  As the payments were interest only they were only required to pay around $450 per month.  That said when considering my lenders requirements, I have to work out a payment of $1,650 per month which is 3% of the balance.  At this time they don't qualify.  In the long run, it would have been way better to have a car loan with a fixed payment of around $600 - $700 per month.  With that payment, they would easily qualify for what they are looking for.  Fortunately for them I have a plan.  They will be able to buy their new house in the near future. Not too long ago, Equifax changed the way their system produces credit score.  I have discovered unsecured debt like credit cards and lines of credit play a big role in your credit score.  For instance, if you have a credit limit of $10,000 and your balance is $10,000 it is going to quite heavily impact your credit score negatively and ultimately effect whether or not you can get into a new house.  Ideally you want your balance on your unsecured debt to be below 33% of the limit so if you have a $10,000 limit you want that balance to be no higher than about $3,300.  This leads me to believe it is never a great strategy to pay off one balance but to consider knocking down the balances on all of your credit accounts at the same time so as to produce the best possible credit score. At the end of the day I have several tips and tricks which can help you get your dream home or forever house.  Contact me prior to making any decisions regarding debt and I will offer you the best free advice I can.  Always working for you.  #showmethemooney  #mortgage #mortgagebroker  #realestate  #invest #property #house #firsttimebuyer #home #condo #buy #sell #bayfieldmortgage #verico #yyc #airdrie #mortgages #yycmortgage #yycrealestate #yycrenovations #yychomes  #investment #realestateyyc #ouryyc  #preapproval #prequalify  #fullservicemortgage Cheers,  Shawn Mooney |Bayfield Mortgage Professionals Ltd. Broker of Record Your Mortgage Broker for Life Bus. # 403-945-8769 | Mobile # 403-828-1838 Email: mortgages@shawnmooney.com Website: www.shawnmooney.com