If you’ve spent any time online lately, you’ve probably seen mortgage brokers warning how a $1,500 truck payment can crush your home-buying plans. It sounds dramatic—but it’s true.
Even if you feel comfortable juggling your current expenses and a new mortgage payment (especially if it’s similar to what you already pay in rent), lenders see your finances through a different lens. They look at every monthly obligation you have—not just income and down payment.
Car loans, student debt, credit cards, boats, snowmobiles, or personal loans can all reduce how much mortgage you qualify for.
Let’s break down how those non-mortgage expenses affect your approval.
Why Your Debt Matters
When a lender reviews your application, they calculate something called a debt-service ratio. This measures the percentage of your gross income that goes toward existing debt payments.
If too much of your income is already spoken for, there’s less room left for a mortgage payment—and that can shrink your qualifying amount dramatically.
Car Loans and Leases
Car payments are one of the biggest mortgage killers.
A $600 monthly car payment can lower your qualifying mortgage by $100,000 or more.
If you’re planning to buy a home soon, consider whether you can pay off or reduce your vehicle loan first. Even trading in or refinancing could improve your affordability and boost your approval potential.
Student Loans
Even if your student loans are in deferral, lenders often factor in a notional payment—usually 1% of the total loan balance per month.
That means a $25,000 student loan can still add $250 to your monthly debt load, reducing how much you can borrow. Small balances may not seem like much, but every dollar of debt counts against your qualifying ratio.
Credit Cards and Lines of Credit
Even unused credit can affect your mortgage numbers.
Most lenders assume a minimum payment of 3% of the credit limit for credit cards, or the actual payment amount for lines of credit.
For example, a $20,000 credit card balance adds a $600 assumed monthly payment to your profile—even if you’re only paying $100 each month.
Paying down or consolidating revolving debt before applying for a mortgage can make a noticeable difference. But don’t rush to close your oldest zero-balance cards—long-standing accounts strengthen your credit history.
Tips to Strengthen Your Affordability
✅Pay down balances. Reducing credit card or line-of-credit debt directly improves your debt ratios.
🚫Avoid new loans. Hold off on financing a new car, boat, or personal loan before your mortgage closes.
🔄Consolidate strategically. Combining high-interest debts into one amortizing loan can lower your payments and simplify your profile.
💬Talk to your broker early. A quick affordability review can show exactly how paying off, consolidating, or keeping certain debts affects your approval.
Plan Before You Apply
Sometimes, small financial adjustments—like paying off a car loan or lowering a credit balance—can change your approval range by tens of thousands of dollars.
If you’re planning to buy or refinance, now is the time to review your debt structure and create a smart path forward.