WizeAss

iTrader: (5)

Wanting to get info on Debt to Income Ratio....

I am about to purchase a new house after I sell mine. 3 months ago I had paid down all my credit card debt (minus a couple hundred bucks)..... Lately I have put a good amount of money on plastic to fix up my house to sell (new carpet, repainted inside and out, replaced back door, plumbing repairs, new fence etc etc)

So with that and getting my car finished up I have put about 8k on my balances. How negative does this look for income to debt? I plan to get all of this and then some back when I sell my house. Should I go ahead and pay it off and liquidate some of the earnings I made in the market this year? I hate pulling money off of investments that generate a good rate of return and dividend to pay off this kind of debt. How much is too much in terms of credit cards... how is this stuff evaluated??

Advice needed! Thanks!

aggiez28

iTrader: (19)

cant help you unless you give more info. your asking about Debt to Income Ratios yet you have not given us either full number

if you make 150k a year and you have no other debt besides the card then I doubt its gonna matter.

if you make 30k a year and you still owe a bunch on your current house it may matter.

I know there are a few loan officers on here. hopefully they can help you out if you give them the needed info


good luck
brook

WizeAss

iTrader: (5)

I make between 100 and 140 per year... depending on the year. No other debt.... other then 4k on one car and 8k on the other. and the house.

POC

iTrader: (7)

what price range are you looking to buy in?

WizeAss

iTrader: (5)

155 to 195 .... give or take.

POC

iTrader: (7)

If your making 100k and buying a 200k home you wont have any problem with debt to income. You should be well under any guidelines at that price range.

aggiez28

iTrader: (19)

I am not a loan officer but I think your fine.

POC

iTrader: (7)

I am

AllThrottle4U

iTrader: (14)

Working as a personal banker not specific to a mortgage we figured up DTI as you minimum payment for your credit cards for the month plus existing mtg's or personal installment loans. It does not include utilities, cell phone, ect... Also your income is provided in before tax dollars. For example on the 8000.00 credit card debt, your minimum pymt should be around 200.00, let's say you have a car note of 300.00, a student loan of 120.00, and an existing mortgage of 650.00. So your outgoing major debt is 1270.00 per month. The banks would like you to keep your DTI below 40-45%. Now if you are buying this new house they will include the payment of the new house as debt. So instead of 1270.00 you can now add 1200.00-1400.00 for a total of around 2500.00 per month. They want to make sure you can afford the new house. As far as the 650.00 per month you're hypothetically paying on you current mortgage, i'm not sure if they include it if it's on the market, someone will chime in to clarify. So let's go with the figure of 2500.00 per month on major debt which includes all your existing stuff plus the new mortgage. You would have to be making around 6000.00 before tax income per month to be around 40%. Some banks will qualify you if your DTI is over 45% but you will pay more interest and it's harder to obtain. BTW there's no way around the FICO score, if you have over 650 you should be ok. Some factors that play a role are payment history, balance to revolving credit limits ratio, ect...if you have a balance of 8000.00 on your credit card and the limit is 8500.00 that will lower your score. On the flip side if you have 5 credit cards with limits of 8000 each then your total revolving credit limit is 40K. If you only owe 8k on one of them its ok. It's a ratio, so when people close cards they don't use, it can actually hurt you. FICO score is more of a preliminary qualification, some banks will let u buy if it's below 600 called subprime. This is coming back to bite most lenders in the *** as those are the ones not making their payments, thus tightening up on the qualifications. This is the way Chase Bank does it.
Paul

POC

iTrader: (7)

Actually most mortgage loans go up to 55% without increasing rates. Unless you are buying over 417k.

WizeAss

iTrader: (5)

you guys are sure it is 40%??? wow. I am def. okay.

my house is only 1200 now.....cards are zero interest... some of them. so that is only a max of 200 give or take. car payments are under 500 for both.

so that puts me at 2000 give or take. So I am at 15% give or take. Fico score could be better.... but it isnt bad. around 660-720's.... really cant remember where it is at anymore.

Thanks.

BTW, if I pay it off... how much does it raise my score or lower my interest on the new house. I am currently in a Nationwide Home Loans 5.5% ARM which is awesome...... rate hasnt changed and allowed me to put more to principal. I was thinking of going with a Interest only loan... so I can take the principal and put it toward investments. I can make more money on the market then banks give me in principal and properties give me in appreciation.

WMSuperSport

iTrader: (23)

What do you do for a living? Just curious.

Splitz

iTrader: (1)

My situation:

The year that I closed (3/2006):

I made $42k

Was approved for a $108k 6.25% (VA Granted but it doesn't mean guaranteed approval).

Ok, now, when I was "preapproved" my FICO score was 525 After I did some stuff and got things removed (rolled off everything was more than 7 years old), my score jumped to 611. Now, I CLOSED and are paying on my mortage and it's been 16 months.

Also, considering the subprime market right now and the AREA that you live in will determine WHO they will give loans to (not necessarily DTI).

I had no "open" credit cards, paid off car loan, and a bunch of **** in collections but was EXTREMELY old. My mortgage was NOT "desktop" underwritten. It was underwritten by the broken MANUALLY going through line by line with me on my accounts and my credit report. I had to write a letter explaining EVERY chargeoff (even for the 7+ years old accounts).

In my experience, it's not what is necessarily on your credit report, but your ability to pay which takes me weight than anything.

POC

iTrader: (7)

Dont make any changes to your credit. Paying off credit can actually lower your score for a while. Your Debt to Income Ratio is fine. Stop worrying about that.

Compare the interest only payment to the principal and interest payments. They usually arent that much difference. And if you plan on keeping the house for a while its a bad move. You're not gaining any equity in the home so its just like renting. Unless you buy in a very good market and the values are going up drastically. But with the way the market is going i wouldnt suggest taking that risk.

After i explain that to most people there come back is....I can just refi into a principal and interest loan later. True but you gotta pay closing cost again.

WizeAss

iTrader: (5)

I plan to buy on the short term. less then 5 years. If I pay 300 to principal over a 5 year period of time that is 18000.00..... If I take the same amount of money and put it in the market... yet at 10% in 6 years making 300.00 deposits every month instead of applying the money to principal I will have 31,085.00

Seems to me that the risk to make 31k vs 18k is worth it. Also I am buying in an area that has appreciation vs where I am now. Even if I make less then 10% and only 4% or so I will have 25,213.46....... seems to me like those other 30yr folks are undisciplined and have to rely on the bank to save.

Be the bank.....this is what the affluent do.

POC

iTrader: (7)

5 years isnt short term. Average ownership is 7 years. You'll be fine.

AllThrottle4U

iTrader: (14)

Forteen3GT, what you're talking about is a new way of thinking that has gained popularity in the last couple of years. Do a Google search on " A tale of two brothers" but also plug in the word mortgage. Some mortgage company did a hypothetical comparison of exactly what your talking about, it's pretty interesting actually. Some of the weight to take in to consideration is the housing market. It's way too inflated. Do you really believe a house, somewhere five years ago in a no name town, appraised for 80k is going to be worth 160k today? It isn't, and the bubble is going to burst because too many houses are going to forclosure and the market will be flooded with cheap homes and the banks aren't going to lend to speculative prospects(again). On the other hand, is the investment community going to see record profits like the last 3-5 years? It's all speculation, and to be quite honest we have no control. The question is which will go first, the housing side, or the investment side. If you put your money into a sound investment, maybe a conservative mutual fund, tried and tested, you would be safer than a single stock or a small cap fund. Are the earnings there? Or is the housing appreciation there? Investments are also more liquid. Just my two cents.

WizeAss

iTrader: (5)

I came up with the thoughts of interest only on my own. I will search google... headed out to dinner with the wifey for her birthday.