Getting ready to apply for a home loan is a big deal, and you want to make sure everything goes as smoothly as possible. But there’s one common mistake that can really hurt your chances of getting approved: Don’t take on new debt before applying for a home loan.

Why New Debt Can Be a Problem

Lenders want to know that you’re financially stable and able to manage your home loan repayments. When you take on new debt right before applying, it can mess with how they view your financial situation. Here’s why:

1. It Changes Your Debt-to-Income Ratio
   Lenders look at your debt-to-income (DTI) ratio, which compares how much money you earn each month to how much you owe. If you take on new debt—like a car loan or finance a big purchase—your DTI goes up. A high DTI can make lenders nervous about giving you a home loan because they want to be sure you can comfortably manage your repayments.
2. It Can Lower Your Credit Score
   Your credit score is super important when applying for a home loan. Taking on new debt or applying for new credit can temporarily lower your score. Even a small dip could mean higher interest rates or, in some cases, a denied application.
3. It Can Reduce How Much You Can Borrow
   Taking on extra debt before applying for a home loan doesn’t just affect your application, it can also limit how much you can borrow. Lenders take your existing debt into account when determining how much they’re willing to lend you. The more debt you have, the less borrowing power you’ll have for your home loan, which might leave you with fewer options for the home you want.

When you’re getting ready to apply for a home loan, it’s important to keep your finances steady. Avoid taking on new debt until after you’ve been approved. If you’re unsure about what’s best for your situation, a mortgage broker can give you the guidance you need to feel confident throughout the process.

By keeping your financial picture stable and leaning on the support of a mortgage broker, you’ll be well on your way to securing the perfect home loan and making your dream of homeownership a reality.