Financing in 48335>Question Details

Ryan Her, Home Buyer in 48335

What should I do to be in a better shape to get qualified?

Asked by Ryan Her, 48335 Thu Jan 7, 2010

My current FICO is 662. I can use the cash for paying down either the revolving debt to improve the FICO or the car loan so that it won't be counted against my income (better DTI).

If I apply for FHA, what matters more? DTI below 40% or DTI almost 50% and excellent FICO. I head that credit doesn't really matter as much for FHA loans.

I read that if an installment loan has less 10 payments left, it won't be counted, but you cannot pay down the loan to do that. Is this true? I have about 20 payments left, but I can pay down half the balance (plus pay down CC debt a little).

Thanks for your help.

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Hi Ryan
a 662 credit score should be fine for FHA. If you have a stable job and $$ in reserve, a debt to income ratio approaching 50% should be OK too. I would speak to a lender first to see what you qualify for, and if you are approvable for your desired mortgage amount "as is", then I would keep your money in the bank until you get into the new home, THEN decide what to do with it. A lot of people go out and pay off all their debt before buying a home, only to find out the home requires a substantial investment (paint, carpet, furniture, etc). In my mind, it doesn't make sense to pay things off now only to find yourself in the same situation 6 months or 12 months down the road.

If you must pay off some debts now, focus on paying off the debt with the highest interest rate first. Keep the car loan, because installment loans (as opposed to revolving debt like credit cards) weigh in heavier towards building up your credit score.

If I can be of any assistance please feel free to contact me at 313-622-7383 or via email at anthony.grech@bankofamerica.com.

Best of luck
Tony
0 votes Thank Flag Link Fri Jan 8, 2010
Hi Ryan Her

For FHA, you credit score is fine. Unlike Conventional, it will also afford you the best current rate without having to pay any discount pts. Concerning paying off debt, if not to increase your score, the only other reason to pay off (not down but off) debt is to increase the loan amount you can qualify for. What is the price range your looking to get approved for? What is your current monthly income gross? Do you have more than 2 years on the job? Are you looking to include overtime or bonus? If so, you'll need to receipt of both over the past 2 years as well. All these are common and key questions a loan officer will ask you in the qualifying process.

With regards to your DTI, FHA requires that it does not exceed 43% w/o strong compensating factors. For Conventional its now 45%.

With regards to your installment loan, you are correct, paying it down won't decrease your number of remaining payments.

Finally, its always more advantageous to show and keep as much cash reserves as possible. I'm a local lender, and if I can be of any further assistance in getting you approved, you may contact me at your earliest convenience.

Rudy R. McDowell / Senior Loan Officer
NMLS#: 141856
ShoreMortgage
770 S Adams Birmingham, MI. 48009
o: 800-678-6663 Ext 5154 / f:248-594-6156 /d: 313-410-1344
email: rmcdowell@shoremortgage.com
corp: http://www.shoremortgage.com
"Referrals are the Best Indicators of My Service and Your Satisfaction"
0 votes Thank Flag Link Thu Jan 7, 2010
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