How much debt should I pay off before applying for a mortgage?
Right now, my wife and I are coming close to buy a house. We have enough for a downpayment, but also some short-term debts (a few thousand on credit card and line of credit), and a long-term student loan debt (35K total). We’re kind of wondering whether we should try to clear all of the short-term debt before we get approved for a mortgage, and whether that will even make a difference in the mortgage calculations?
Does anyone know the ratios/formulas that lenders use when considering our debt? Should we continue to pay the debts off entirely, or just jump in with a mortgage? Should we reduce our credit limits?
What would you do?