If you're looking to buy a home, there's a good chance you can't afford to purchase it outright. Rather, you'll need to do what most prospective buyers do -- apply for a mortgage and pay off that property over time.
But how can you make sure you get approved for a mortgage? There are a number of factors that lenders evaluate when determining whether you're a viable candidate for a home loan, but if you really want to improve your odds, it pays to focus on one key thing: paying off debt.
How paying off debt could land you a mortgage
What does outstanding debt have to do with getting a mortgage? A lot, actually. There are several factors that mortgage lenders look at when assessing you as a loan candidate. These include your:
Now, paying off your existing debt won't change the amount of money your employer pays you, nor will it put more money in your savings account for a down payment since you're applying that money toward your outstanding obligations. But it will help improve both your credit score and your debt-to-income ratio.
Boosting your credit score
Your credit score is based on a number of factors, and credit utilization is one of them. Credit utilization speaks to the amount of revolving credit you're using at once, and the lower that rate, the better. Therefore, if you have a gigantic credit card balance you've been carrying for months and you manage to whittle it down, you'll improve your utilization rate and your credit score will quickly increase.