Small debts can have a big affect when borrowing to buy a home.

You might be in for a rude shock when you finally put that paperwork through to the bank.

New figures from finder.com.au have revealed just owing a few thousands dollars can significantly reduce your borrowing capacity by much more than you owe.

You could reduce your borrowing capacity by up to $99,000 if you own money on credit cards, personal loans and car loans, even if you don’t own that much.

SUBURBS TEETERING ON THE EDGE OF MILLION DOLLAR MEDIANS

The research revealed that the average Australian with a personal loan has a debt of about $12,600, while the average credit card balance was $3114 and a car loan $16,320.

The combined $32,077 debt would reduce what a bank was prepared to lend you for a home, by more than three times that amount - $99,000.

Owing a few thousand on your credit card can reduce your home loan borrowing capacity significantly.Source:Getty Images

AVERAGE DEBT REDUCES BORROWING POWER BY

Personal loan $12,643 - $41,000

Car loan $16,320 - $46,000

Credit card $3,114 - $12,000

Michelle Hutchison of finder.com.au said a rule of thumb was that if you tripled the value of your debt, that’s about how much less a lender would be prepared to give you for a home loan.

“With the average house price in Australia at $612,100, any reduction in borrowing power could severely limit what property you can afford to buy,’’ she said.

Mr Hutchison said potential home buyers should aim to get rid of debts even those considered fairly small before borrowing.

“Before applying for a home loan, make a determined attempt to get rid of all the outstanding debts that you can and if possible get rid of any credit cards you don’t need or reduce their limits,” she said.