Personal Loans and Mortgages: How Do They Interact?

May 15, 2023 | Categories: Home, Personal Finance

Suppose you plan to apply for a mortgage shortly but also considering taking out a personal loan for another purpose. In that case, there are things to know about how personal loans and mortgages interact with one another and if a personal loan will impact your finances positively or negatively.

So, what are personal loans? Personal loans are borrowed funds that can be used to pay for things like a wedding, vacation, home repair or improvement, or a medical bill for you or a pet.

Can Personal Loans Affect Mortgage Applications?

When you apply for a mortgage, the lender looks at your financial picture. That picture includes your credit history, credit score, and any other debt you might have. If you have a personal loan, the lender will examine the loan amount, your income, and other debt and if you’ve made regular, on-time payments.

Perhaps you’re buying land with a personal loan and are now ready to build but need to take out a mortgage loan. Having a loan for the land purchase may have been necessary, but there are benefits and risks of personal loans, and they may impact a home mortgage loan.

How Personal Loans Can Affect Getting a Mortgage

Your personal loan history and the amount of money you owe in personal loan debt can affect your ability to get a mortgage. Here’s how they play a part: Credit Score, Payment History, Payment History

Tips To Help Your Mortgage Application

You may want to consider some tips when learning what is needed to buy a house, how to expedite the application process, and make the path to your goal — getting a mortgage — just a little smoother.

•  We are reviewing your credit report and correcting any errors or discrepancies.
• You are improving your credit score by paying down debt balances.
• Ensure your financial records are accurate so you’re prepared when looking at your economic history with a lender.
• Gathering required application paperwork such as recent pay stubs, tax returns, bank statements, debt statements, and other records your mortgage lender may request.
• Familiarizing yourself with terminology you might see on the mortgage application makes it easier to understand everything before signing the loan agreement…

If you need further help, we suggest reading the entire article for more information at SoFi.

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