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Established Contributor
Posts: 512
Registered: ‎06-08-2007
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Pay down or Down Payment

Hi all, I'm thinking of buying a house sometime in January 2008 when my rent lease ends. My current rent is $1059/month & my EQ FICO is currently 619.
 
I have about $14k in CC debt, both accounts are current. I am expecting a lumpsum in the tune of $20k soon and am debating weather to pay off my debt, or use the money on a down payment for the house.   
 
What would you do if you were in my shoes?
Established Contributor
Posts: 560
Registered: ‎05-03-2007
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Re: Pay down or Down Payment

without knowing more, and assuming your cr's are fairly clean, i would pay down the cc debt to 1-9%....probably get a pretty decent score boost and possibly qualify for a ndp mortgage at a better interest rate.  i would check all three fico scores. 
Regular Contributor
Posts: 226
Registered: ‎03-25-2007
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Re: Pay down or Down Payment

A good loan broker might be helpful making this decision.  The broker will know what kind of rates you qualify for based on money available and credit.  OneMortgageGuy here sounds like a good one.
Senior Contributor
Posts: 3,071
Registered: ‎05-17-2007
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Re: Pay down or Down Payment

Good call. Ask the broker how much you will save if you pay down debt combined with a better score.
If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Regular Contributor
Posts: 255
Registered: ‎06-08-2007
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Re: Pay down or Down Payment

With your score you are on the line of prime and subprime! A good loan officer will look at you credit report and look at all the options. Most loan officers take the easy way out and the easy way can pay them more and cost you more!!
 
They need to try to take you Alt-A or get an uplift to go Prime. If I were you I would pay everything on time and put the 20K in the bank. Go prime they are going to ask for 3 months of you bank statements to show that the money has been in your account or to get around that tell them to do a Verification of Deposit.
 
To get the uplift to take you prime... Min of 2 years at the same job or field, No or Paid collections, no liens, and No BK. If you do have a BK you can get around it to go prime. The loan officer just needs to know how to get through and not around the guidelines.
 
I use to work in a special department where I would under cut and out smart other loan officers. I out smarted them by showing the borrower what was going on and how to read the doc's. In that department I would see HUDs from other companys all day and see all the bull$hit and just break it down for the borrowers. Now im just going blah...blah... blah...
 
My point is take good notes!!! Get the loan amount, rate, term, and payment before taxed and insurance. Ask about prepays and keep asking till you run out of things to ask!
Regular Contributor
Posts: 255
Registered: ‎06-08-2007
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Re: Pay down or Down Payment

Thanks Rocket01!!!
Senior Contributor
Posts: 3,071
Registered: ‎05-17-2007
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Re: Pay down or Down Payment

Question for OneMortgageGuy please. If one was already prime, is it better to have:

A. more money in the bank
or
B. less credit card debt

Or being more specific, does it help to take money off credit cards 3 months before applying to have more to put down?

Thanks in advance.
If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Established Contributor
Posts: 512
Registered: ‎06-08-2007
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Re: Pay down or Down Payment

Wow, and I thought it was just an simple solution. I appreciate the info, I'll definitely look into everything you mentioned. Is the 3 month check on bank accounts standard when applying for a mortgage?
Established Contributor
Posts: 630
Registered: ‎06-20-2007
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Re: Pay down or Down Payment

I think that is a must when a lender is packaging the loan to sell in the seconday market(FaNieMA) they have strick guide lines.
9/18/08 TU=707 EQ=706 EX=702
Regular Contributor
Posts: 255
Registered: ‎06-08-2007
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Re: Pay down or Down Payment

[ Edited ]
Lets just say Im a prime borrower with a 650 Fico and I have 20K in the bank. Hmmmm A or B?
 
Well for Fanniemae you need 3 - 6 months of PITI or maybe my fico is 650 and I have a BK that 3 years old with no late of collections after and I want to go prime. Either way I need 3-6 months of PITI.
 
OR
 
Maybe Im prime with a 650 and my DR is too high... then I could pay off the debt and lower my DR.
 
I thing for me the answer would be A because if I have the money in the bank I can show cash and if I need to lower my DR I can paid debt on the HUD at closing.
 
BUT
 
Every borrower is different and you need to speak with a loan officer. Just remember that you can give the same loan to 10 loan officers and get 10 different loans back. A good loan officer will do all the leg work to get you the best deal. The loan officers that come back with crap are the ones thinking about getting paid.
 
Do what's best for you and remember that both A and B could be right and maybe we didn't see a C or D option. EVERYONE IS DIFFERENT!!!!!!!!!!!!!!!!!!!!!!!!!!!


Message Edited by OneMortgageGuy on 06-27-2007 11:08 AM
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