How Much Is Too Much Debt to Have When You’re Looking to Buy a House?

In an ideal world, you would be debt free when purchasing a home. This allows the following:

• The higher the credit score, the lower your mortgage interest rate will be.
• Boards of co-ops (and sometimes condos) will have no issue with your credit.
• Greater purchasing power as debt may prevent you from borrowing as much as you wanted.
  
  

However, we live in a pragmatic world. As such, I advise the following strategy with debt when buying:

Credit Cards/Store Cards

• Pay them off before applying for a mortgage.
• Credit card debt is frown upon co-ops and condos. You could be turned down because of it.
• Do NOT max out your cards after you receive your mortgage commitment letter and board approval. Banks run everything one more time before the closing. People have been denied a mortgage after they maxed out their cards buying furniture for the new home prior to closing.
  
  

• Definitely pay off.
  
  

• Ideally not great but "part of life" in some markets. In urban centers such as NYC, a question may come up as to why you need a car.

• Perhaps the only "good debt" with caveats. Having $200,000 in debt from med school and you are a doctor is different than $200,000 in debt from a fine arts major and you work at a coffee house.