Best Credit/Cash Strategy - about to buy and sell a house

[NorthEast_Corner]

Hi folks -

I am about to sell my current starter home and move up to something bigger for my family. I am trying to figure out the best way to use my credit and cash reserves in order to get the best mortgage rate on the new home. Here's the picture:

Current mortgage about $200k on house should sell for $430k
HELOC at $63k of $100k line
New house will cost about $460k (after payoffs, 30% down payment)
FICO avg 695 (702,697, 685)
Cars are both paid off last year
Multiple Credit Cards - some zero balance; mostly at 10-30% util except two (54% and 65%)
2 lates from Years 2001 & 2002 (one on mortgage)
1 paid charge off from 2001

Cash reserves are $18k liquid, $40k in 401k/IRA


Here are my questions:

Will the avg score being 695 make a big difference on a new mortgage rate versus 700+?

In which case I think I want to drop the util on the two credit cards over 50% so I can raise my score(s) those precious few points, no? (Though that'll use precious cash I need for other things, see below!)

I need to do about $15k worth of home upgrades/repairs now in order to get the price I mentioned. Do I use cash reserves, HELOC or credit cards to pay for the home repairs? I am thinking of using the HELOC for the repairs, as I don't want any other credit cards to go to above 30% util and I think I need the cash reserves when I apply for the loan (and for the deposit when I make an offer on the new house!) Or do I maybe spread out the repair cost between the HELOC, CCs and cash to keep things balanced?

Thoughts Gurus?
Thanks in advance!

Message Edited by NorthEast_Corner on 04-18-2007 05:38 AM

[Anonymous]

First things first... leave that 401K alone.  Touching that now, will immediately cost you 30% in tax and when you retire, with that amount of money in it right now will cost you possibly $500K (I'm making some assumptions but unless you're in your late 40's- 50's then I'm in the right ball park...)

Your credit score will get you a prime mortgage so nothing to worry about there. BTW the utilization is worked on out on the sum of available debt and sum of that used.  So it won't matter if you have half your cards maxed out and the other half at zero, or any other combination. If you have $50K available in total and you owe $30K in total it doesn't matter where that $30K is.. could all be on one card for what it matters.

Frankly I would keep it simple...  use the cash to pay for the repairs, sell the 1st house, get a 15year fixed mortgage for the 2nd and put the $3K cash left onto the cards... then work to pay them off as soon as possible.

Good luck!

[NorthEast_Corner]

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@Anonymous wrote:
Your credit score will get you a prime mortgage so nothing to worry about there.

The score will get me a prime mortgage(and assuming I full doc etc.) as opposed to subprime or alt-a but will it get me the lowest possible rate?

BTW the utilization is worked on out on the sum of available debt and sum of that used. So it won't matter if you have half your cards maxed out and the other half at zero, or any other combination. If you have $50K available in total and you owe $30K in total it doesn't matter where that $30K is.. could all be on one card for what it matters.

Really? I was getting the impression from reading this board that it was the individual utilizations that would bounce a score?!

Good luck!

Thanks!

[Anonymous]

Best bet is to talk with a mortgage broker and find out what deal they can get you and at what FICO score you'd get a better deal.

Try to goodwill away the old lates. I've had good luck with those. Dispute the old chargeoff. It's old enough they might not bother to validate.

Get your util down under 50% on all credit cards, preferably under 30%, and keep it there.

Don't touch the 401K. At all. Even if you borrow against it, that will figure into your DTI ratio and affect your loan.

Use your HELOC for home improvements to get your existing place sold.

If you want a broader diversity of opinions, hop on over to creditinfocenter and ask in the mortgage forum. Lots of experienced folks in a variety of industries there, including mortgage brokers.

[NorthEast_Corner]

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@Anonymous wrote:

Best bet is to talk with a mortgage broker and find out what deal they can get you and at what FICO score you'd get a better deal.

Try to goodwill away the old lates. I've had good luck with those. Dispute the old chargeoff. It's old enough they might not bother to validate.

Get your util down under 50% on all credit cards, preferably under 30%, and keep it there.

Don't touch the 401K. At all. Even if you borrow against it, that will figure into your DTI ratio and affect your loan.

Use your HELOC for home improvements to get your existing place sold.

If you want a broader diversity of opinions, hop on over to creditinfocenter and ask in the mortgage forum. Lots of experienced folks in a variety of industries there, including mortgage brokers.

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Thanks! (BTW, I like creditinfocenter. Good tip!) I got one of the lates removed this morning by phone. It was easier than I thought (of course, I have about $100k in assets/debt with those folks...) The charge off (paid, as if it matters) was AMEX and I hear from these boards they don't remove as a rule(?)