Auto loan for wife

[K_J]

Hi guys, I am currently shopping for a mortgage loan for a new construction and would like to move our Auto loan currently in my name to my wife’s name to help with my DTI since she wouldn’t be on the mortgage loan. I make 92k/year and she is self employed and doesn’t have a good credit. We are working on getting her medical collections cleared to improve her scores. My question is how do i go about this?

[longhorn11]

First a few questions (if you don't mind me asking), 1) what are her scores? 2) has she ever had an auto loan before? 3) what is her income and principal on the car note? (for DTI picture)

First I would accomplish what you're working on now, getting those medical collections removed.  Second, I would probably try to go through a credit union as opposed to a larger bank.  Your wife will most likely have to submit income verification wherever you get the loan, but depending on the credit union, having an individual to talk to face to face could help.  

[webhopper]

How much is owed on the car vs what is it worth? How much income does your wife report on her schedule C. You may be able to refi it into her name only if the income is there

[K_J]

First a few questions (if you don't mind me asking), 1) what are her scores? 2) has she ever had an auto loan before? 3) what is her income and principal on the car note? (for DTI picture)

Her Scores lender pulled november 2011

on Equifax 580

on Experian 572

on TransUnion 561

Yes she has had 2 previous auto loans  but lost her job to the economy in 2006, currently she does daycare and brings in $450 weekly. the principal on the car note is $19,470 with a monthly payment of $470.

Thanks longhorn11

[K_J]

Actually it is SUV 2007 MDX, I refinanced in December for 6.4 % with capone it is worth more than we own on it. she reported 14k last yr.

[Revelate]

Well, you could refinance it in her name (though you're edging up against the used car age boundary some lenders have), but you're not going to get anywhere close to the 6% you have now.

It's a nice idea, but it's financially not extremely wise unless you believe you're going to be able to refinance back after the mortgage closers;. also I *think* that her credit report will be looked at regardless, and the loan will still be shown.  While that doesn't get calculated for the required scores, it may or may not for DTI, and it certainly may make a difference to the underwriter.

I'd ask this question over in the mortgage board to see if it's even worthwhile, there's a few exceedingly knowledgeable people there, whom I suspect work as either mortgage brokers or in mortgage loan origination / underwriting... do post what your expected mortgage amount is going to be so they can give you better information.

[longhorn11]

Not to be a negative, but it will be extremely tight in trying to get her approved for the car.  Say the loan value is about 19k, even being generous with the interest rate, it would probably be somewhere between 10-14%.  Now if you could get the medical collections removed and that score can get into the low to mid 600s that could take you into the sub 10% category.  With the car being an '07 model, you are looking at probably a 48 month max term on the loan.  All in all you would probably be looking at a payment of $520+/- (14%) rate.  

If her reported income was 14k last year, gross per month was around $1166.  If she can back up the $450/week for this year (pay-stubs, etc.) that would take it to $1800/month.  Huge difference as far as DTI is concerned.  If she doesn't have any other debt (CC's, installment loans, etc.) then her DTI would be around 28% which could be acceptable, it just depends on the lender's DTI guidelines regarding an individual's credit score.  If you go back to the $1166 figure, her DTI would skyrocket to almost 45% which would most likely not fly with the lender.

I agree with Revelate that you should ask if this is absolutely necessary to make your mortgage work.  If you have a mortgage broker or a banker you're working with to get your mortgage, bring this up and see what they suggest.  In some places the underwriters are just down the hall and you will get the exact answer you need.  

Hope this helps!

[K_J]

Thank you Revelate, I do appreciate the infor.

[K_J]

Thank Longhorn11 for your candid opinion; our plan is to pay all her collections with our tax return of which we had already sent out PFD & GW letters. Though we could afford $520 for a car note we're not trying to over strain out budget. Our goal is to apply for a mortgage Nov/Dec this year with a possible march/April delivery, but if we have to wait few extra months or her credit improves significantly she would be on the mortgage.

[longhorn11]

With that time frame you guys should have all the time you need to get everything in great shape.  My main concern in getting it switched over would be the lender's guidelines on DTI as it relates to a credit score.  You probably already know this, but I'll give a quick example...if someone had a 750 score, a DTI of say 48% could be accepted by the lender, but an individual with a score of 550 may only be accepted up to a 25% ratio.  If you guys do end up trying to switch it over, definitely go through a credit union or smaller bank.  In my own experience, being able to talk to the person(s) making the decision could make all the difference in getting something approved with a few percentage points to spare.  Good luck either way!