Badly need advice! Pay off debt to lower DTI even if it means less funds in checking/savings acct?!

[PanthersFan]

Long story short, I have a DTI of 48%, I want to refinance and take cash out to pay off debt, Wells Fargo said they cant count paying off revolving debt though from cash out to lower my DTI but the LO said no worries, even with a 48% DTI they can use "compensating factors." Call me cynical but I dont trust LOs, loan officers are like presidential candidates thst promise everything under the sun and the underwriters are congress that will come back and say no.

So my question is this.. I now have $10,500 in mu checking account, if I pay off the debts to bring my DTI from 48% to the magic number of 43% my balance in my checking account will now be around $5,500. So what is better? Having no debt but also not as much cash on hand in my account or having debt but having a biggger checking account? What do you think the lender will prefer?

And ofcourse im worried that since the lenders need to see last two months bank statements they will see my checking acct balance went down by half because i paid off the debts to lower my DTI then they will deny me due to "suspicious activity" on why my checking account balance dropped so rapdily in the last month.  Any advice?!

[StartingOver10]

Here is my advice:

1) Based on your post - pay off the debt to optimize your score. That means leaving a small balance less than 10% of the credit line on one cc. From your post that means paying off $5k on your cc's.  I don't know why you want to refi if you have the cash in your account already - unless there is a lot more debt then the $5k mentioned.

2) DO NOT REFINANCE WITH WELLS FARGO.  

Go to a good correspondent lender. 

[PanthersFan]

Oh sorry, i should have clarified. A. I want to refinance out of a FHA to eliminate PMI and i also want cash for home improvements

[StartingOver10]

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@PanthersFan wrote:

Oh sorry, i should have clarified. A. I want to refinance out of a FHA to eliminate PMI and i also want cash for home improvements

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Depending upon what the home improvements are - you can get a renovation type loan with conventional financing. Are they large home improvements or small things? 

[CH-7-Mission-Accomplished]

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@StartingOver10 wrote:

Here is my advice:

1) Based on your post - pay off the debt to optimize your score. That means leaving a small balance less than 10% of the credit line on one cc. From your post that means paying off $5k on your cc's.  I don't know why you want to refi if you have the cash in your account already - unless there is a lot more debt then the $5k mentioned.

2) DO NOT REFINANCE WITH WELLS FARGO.  

Go to a good correspondent lender. 

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When you say "correspondent lender" do you mean a mortgage banker or mortgage broker?  This is someone who originates loans to sell into the secondary market but does not keep loans beyond what their line of credit permits?  There are very large mortgage bankers out there.

The reason I ask is I was in mortgage banking for 10 years.  I worked in the correspondent loans area of secondary marketing.  I was with a large mortgage company tied to a very large bank in Seattle (was Rainier Bank at the time) and we bought loans from smaller mortgage brokers.  So the correspondent relationship was between us and the little mortgage brokers, but a consumer would not be able to go out and find a correspondent banker unless they understood the system.

It's just phrseology but I think it can be confusing.

[StartingOver10]

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@CH-7-Mission-Accomplished wrote:

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@StartingOver10 wrote:

Here is my advice:

1) Based on your post - pay off the debt to optimize your score. That means leaving a small balance less than 10% of the credit line on one cc. From your post that means paying off $5k on your cc's.  I don't know why you want to refi if you have the cash in your account already - unless there is a lot more debt then the $5k mentioned.

2) DO NOT REFINANCE WITH WELLS FARGO.  

Go to a good correspondent lender. 

---

When you say "correspondent lender" do you mean a mortgage banker or mortgage broker?  This is someone who originates loans to sell into the secondary market but does not keep loans beyond what their line of credit permits?  There are very large mortgage bankers out there.

The reason I ask is I was in mortgage banking for 10 years.  I worked in the correspondent loans area of secondary marketing.  I was with a large mortgage company tied to a very large bank in Seattle (was Rainier Bank at the time) and we bought loans from smaller mortgage brokers.  So the correspondent relationship was between us and the little mortgage brokers, but a consumer would not be able to go out and find a correspondent banker unless they understood the system.

It's just phrseology but I think it can be confusing.

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I mean a mortgage banker and not a mortgage broker. Need someone that originates, underwrites and funds the loan....and then sells it on the secondary market. 

A mortgage broker has a tendancy to promise more than perform.

A big box bank has more restrictions now than ever + the "LO's" at the big box banks are no longer very experienced from what I have seen. They are basically tellers with a little bit of mortgage training....

I could be using the wrong terminology and I am happy to learn from others. But the phrase in red is exactly what I mean. So what should I be calling this type of lender?

[Anonymous]

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@StartingOver10 wrote:

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I mean a mortgage banker and not a mortgage broker. Need someone that originates, underwrites and funds the loan....and then sells it on the secondary market. 

A mortgage broker has a tendancy to promise more than perform.

A big box bank has more restrictions now than ever + the "LO's" at the big box banks are no longer very experienced from what I have seen. They are basically tellers with a little bit of mortgage training....

I could be using the wrong terminology and I am happy to learn from others. But the phrase in red is exactly what I mean. So what should I be calling this type of lender?

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I am wondering how could the borrower find someone that does that?

I can only think that I would ask my very experienced realtor for advice.  Is there a way to search for someone in the area you are in?

thanks

[Anonymous]

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@PanthersFan wrote:

Long story short, I have a DTI of 48%, I want to refinance and take cash out to pay off debt, Wells Fargo said they cant count paying off revolving debt though from cash out to lower my DTI but the LO said no worries, even with a 48% DTI they can use "compensating factors." Call me cynical but I dont trust LOs, loan officers are like presidential candidates thst promise everything under the sun and the underwriters are congress that will come back and say no.

So my question is this.. I now have $10,500 in mu checking account, if I pay off the debts to bring my DTI from 48% to the magic number of 43% my balance in my checking account will now be around $5,500. So what is better? Having no debt but also not as much cash on hand in my account or having debt but having a biggger checking account? What do you think the lender will prefer?

And ofcourse im worried that since the lenders need to see last two months bank statements they will see my checking acct balance went down by half because i paid off the debts to lower my DTI then they will deny me due to "suspicious activity" on why my checking account balance dropped so rapdily in the last month.  Any advice?!

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^^^ That doesn't make sense. They should be able to exclude debts that are being paid off through the cash-out refi.

[edcampbell613]

Instalment debt yes except an auto lease

Revolving debt (credit cards) no

I worked for Wells for 6 years.

The bank I work for now you just have to pay the balance down. 

And this is a Fannie loan.