Can I get approved for a mortgage with fair credit while having a personal loan?

I have a personal loan in the amount of $7,000 that is going to take five years to pay off. I am making installment payment to get it payed off in 12 months though. My problem is my fiance and I are trying to purchase a house while the market is down but I am afraid to apply for a mortgage knowing I have this loan... show more I have a personal loan in the amount of $7,000 that is going to take five years to pay off. I am making installment payment to get it payed off in 12 months though. My problem is my fiance and I are trying to purchase a house while the market is down but I am afraid to apply for a mortgage knowing I have this loan out along with some other small credit lines. If I were to pay off the credit cards and at least half of this loan do I have a good chance of being approved for a mortgage being a first time home buyer and having fair credit?
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