Jacques Poujade is the Managing Partner at LendPlus, one of the major alternative lenders in the mortgage industry specializing in helping customers who are looking to buy their dream homes. With three decades in finance, real estate, and marketing, Poujade uses his skills, experiences, and knowledge to craft focused and strategic financial solutions for his clients.
Poujade earned his Bachelor’s degree in Commerce from Concordia University before moving on to complete his Masters at McGill University in Montreal, Canada. After graduation Poujade quickly rose up the ranks in the corporate world of finance and eventually landed into the role of Managing Partner at LendPlus. When Poujade is not working, he gives back to his community through Micah’s Way charity.
Recently, he sat down and shared with us information about good and bad debts and how debts can affect your chances for favorable mortgage rates.
What is Considered Good Debt?
Good debts are usually debts from expenses that are expected to bring in income or increase your net worth. These could be anything from loans for a college education, loans to finance your own business, or loans to buy a house or any other type of real estate as an investment. Student loans are a good example because unlike other types of debts, most student loan packages come with low-interest rates. Student loans are also taken out to pay for a college education which increases your opportunities for employment and promotion later in life.
What is Considered Bad Debt?
— Jacques Poujade (@PoujadeJacques) December 31, 2018
Bad debts are debts that are not expected to bring in any additional income anytime soon. These debts are often total liabilities such as spending on brand new cars, clothes, and other consumables. These items tend to depreciate quickly and often are worth lower than the borrowed amount by the time the debt is paid in full. Credit card debt is one of the worst examples of bad debts because this can come bundled with high interest rates.
Debt and Mortgage Consideration
Outstanding debts whether good or bad can affect your credit score and how high or low your mortgage rates are. This is the reason why you should be paying your debts off on time whether these are good or bad debts.
Lenders usually calculate your monthly debt to determine if you are qualified for a mortgage. This is done by reviewing your income and existing debts and comparing these to your house payments to see if you can pay on time. If you pay off your debts on a regular basis and you have a reliable, long-term regular source of income, you are more likely to have a favorable debt-to-income ratio–a figure that tells the lender how well you can manage debt and mortgage payments with the income you have.
If you can, pay off all your debts before taking on a new mortgage. Outstanding balances on your credit cards, for example, can leave you saddled with high interest rates that will get harder and harder to pay off once you take on a new mortgage. If not, make sure that payments are made on time. This is the only way to keep your debt payments manageable and ensure that your debt-to-income ratios are within range. These can help make you an ideal candidate for low rates when it’s time to apply for a new mortgage.
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