r/CRedit • u/LankyCommission7106 • 8d ago

Mortgage Good debt?

I hear it’s good to have different types of debt to diversify your credit file. When buying a home would it be best to have small amount of debt in each category like revolving and installment debt OR would it be best to have 0 debt?

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u/0xffd2 8d ago

Zero debt is almost always better when applying for a mortgage. Lenders care way more about your debt to income ratio than credit mix.

Having a small balance on cards can actually hurt because they calculate DTI based on minimum payments. Are you planning to buy soon?

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u/LankyCommission7106 8d ago

I plan to buy in the next year or two. My DTI is around 30%. I can get that lower before then though. Is that a bad DTI ratio?

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u/JennF72 8d ago

30% isn't that bad but what is your disposable income after the 30%? For low income it could make or break the mortgage and for higher incomes, you'll have more in disposable at 30%.

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u/LankyCommission7106 8d ago

Disposable is about $5,500 after bills and expenses.

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u/JennF72 8d ago

You'll be fine then. I'm taking in account you've figured in the cost of the mortgage with this.