Paying Off Debt Before Applying for Home Mortgage

Reader Question: How much time before applying for a home mortgage is it good to pay off debts on credit report?

I've received similar questions through our Credit Help Blog lately (it's another Q&A blog similar to this one). So it's probably best if I just post some links to those Q&A sessions. Here they are, in no particular order:

Paying Off Debt to Increase My Credit Score
This person asked a similar question to yours. He actually paid off most of his debt and was wondering how long it would take for his credit score to rise. Of course, I cannot answer that kind of question without a crystal ball, but I did my best to explain how the process works and what he might expect.

Will Paying Off My Bills Raise My Credit Score?
In this Q&A session, I explained the credit utilization ratio and how it relates to debt, FICO scores, mortgage qualification, etc. This one's probably worth a read too, because it addresses the same subject but from a different angle.

Debt-to-Income Ratio for Mortgage Qualification
You sound like you're familiar with the concept of DTI ratio already. If not, this article will explain how lenders will look at your your debt when considering you for a loan. Many home buyers don't realize that DTI ratio is just as important as credit scores when applying for a home loan.

With all of this being said, reducing debt is always a worthy pursuit. And in most cases, sooner is better than later. Not only will it make it easier to get approved for a mortgage loan, but it will help you qualify for a better interest rate as well (by improving your credit score). No better time like the present!

I hope that helps. Good luck, and happy holidays.

~Brandon