Debt Decoded: What Lenders Actually Care About

That Home Loan Hub

The myth that you need to be completely debt-free to buy a home stops countless potential homeowners from even trying. The truth? Not all debt is created equal, and understanding the difference could be your key to mortgage approval.
Lenders don't just look at your income and deposit—they scrutinize every financial commitment against your borrowing capacity. That $5,000 credit card you hardly touch? Banks assume it's maxed out. Those seemingly innocent buy-now-pay-later accounts for clothes and electronics? They're chipping away at your borrowing power with every purchase.
Take Ryan and Mel, who came to me with stable incomes and a solid $70,000 deposit, but their car loan and credit cards were roadblocks to their dream home in Port-au-Rouge. After clearing one credit card completely, reducing another's limit, and refinancing their car loan, their borrowing capacity increased by an astonishing $92,000—transforming rejection into approval.
Red flags that make lenders nervous include payday loans, missed payments, and high-interest retail finance deals. In the neutral zone, you'll find student loans and low-interest car loans that affect calculations but aren't deal-breakers. The green zone? Clean repayment history, minimal consumer debt, and proactively reduced credit limits before applying.
Strategic debt management is your most powerful tool when preparing for a mortgage application. Get your credit report early to check for surprises, pay down small balances, lower credit limits even on cards you don't use, and avoid applying for new loans before seeking mortgage approval. Remember—debt doesn't disqualify you from homeownership, but it does determine how much you can borrow and on what terms.
If you're carrying debt and uncertain about your mortgage prospects, let's talk strategy without judgment. One good plan can change everything—and that home you've been dreaming about might be more attainable than you think.

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Chapters

1. Debt Impact On Mortgage Applications (00:00:00)

2. Ryan & Mel's Success Story (00:01:30)

3. Red Flags vs Green Zones (00:03:01)

4. Strategic Debt Management Tips (00:03:50)

5. Episode Wrap-up & Invitation (00:05:08)