You do not need to have any debt to qualify for a mortgage, and most homeowners have a few of the types of financing listed above as well. Car financing is a form of debt that will be treated like one by your mortgage lender. Lenders will want to see that your income is enough to comfortably cover bills, loan payments (including car finance) and living expenses before offering you a mortgage.
Start by getting pre-qualified--or, better yet, preapproved--to find out what different lenders will offer, based on your credit report, income, and debt. Pay off car financing payments on time (and every other loan or credit bill). These steps can improve your credit score, which can help you qualify for a lower loan rate. Generally, the better your credit score, the lower your interest rates will be. This is where having student loan debt really helps you: If you are making on-time payments, you are probably going to have a pretty good credit score, so banks are going to feel comfortable borrowing from you. If you are making $500 in credit card payments each month, but your student loan payments are $800, then getting approved for a $1,600 mortgage each month, or being able to afford to borrow $1, is going to be more difficult.
The total of all of your monthly payments -- credit cards, your current rent or mortgage, your car payments, student loans, etc -- should not add up to more than 36% of your total monthly income. While there are some 0% down programs, like the VA loans available to service members, veterans, and families, or the USDA-backed loans that subsidize homes in eligible rural areas, typical down payments can be as low as 3 percent as high as 20%. No other mortgage offers that benefit, but VA loans are open to qualifying service members, veterans, and survivors' spouses only. Veterans or active-duty military, or members of the Guard or Reserve, can qualify for a VA loan, which can help save veterans or active-duty service members money, with lower or no-down-payment options and no home insurance requirements.
You may be able to qualify for a mortgage with little down payment, but your lender may ask that you have to purchase private mortgage insurance (PMI) to cover the greater perceived risk. Slashing a mere one-quarter of a percentage point from the interest rate, or getting a lower rate on mortgage insurance, could save thousands. Tax breaks can help lower your mortgage's effective cost since the mortgage interest you pay is deductible against your taxes. Being a servicer does not necessarily mean getting a better mortgage deal. Another thing to think about when trying to decide whether or not the time is right for you to apply for a mortgage is the amount of taxes you are going to owe on your home, and how having a mortgage would impact your tax bills.