Can new car hurt our chances?

[Anonymous]

Hi,

In July I bought a new car. My payment is $423.

Sometime next spring / early summer my fiance and I plan on purchasing a home. Our monthly income is roughly $7100.

In addition to my car payment, we have $210 in student loans and about $100 in CC payments.

Will having a 10 month old auto loan sway the underwriter one way or an other even though our current DTI is ~10%?

We plan to go FHA with a 3% down payment and have a seller pay for closing costs. We may end up using a CC for the down payment and then use the $7500 tax credit to pay it off. This will however increase our DTI to ~11.5%.

Her TC credit scores are 780-790 (probably 760ish FICO) and my FICO will be around 720 come time to purchase.

Do you guys (and gals) think we will be ok? We are hoping to be approved for $275K.

[v8eaterWRX]

At that montly income, utilization, and scores I cannot imagine that will be an issue. I had a refi in January and closed on a house in June without the underwriter batting an eye, and this was with lower fico, lower income, and higher utilization.

Message Edited by v8eaterWRX on 10-21-2008 06:06 PM

[Anonymous]

---

@Anonymous wrote:

We plan to go FHA with a 3% down payment and have a seller pay for closing costs. We may end up using a CC for the down payment and then use the $7500 tax credit to pay it off. This will however increase our DTI to ~11.5%.

---

I know this wasn't your question but two thoughts until the experts come along. I believe FHA is going to 3.5% minimum starting Jan 2009.  Also, the lenders like to see where the downpayment comes from and I wonder if they wouldn't get suspicious if they saw a big dump into the bank account that corresponds with a large charge on the card..

[Watchmann]

---

@Anonymous wrote:

We plan to go FHA with a 3% down payment and have a seller pay for closing costs. We may end up using a CC for the down payment and then use the $7500 tax credit to pay it off. This will however increase our DTI to ~11.5%.

Do you guys (and gals) think we will be ok? We are hoping to be approved for $275K.

---

You'll probably be ok, but I question why with $7,100 of income per month, and only a car payment, student loan, and relatively small other bills you can't scrape up the 3% down payment in cash?  Do you not have any reserves or savings in the bank?  That will raise eyebrows, and they won't look favorably on using a CC for a down payment.  They will probably flat out deny it.

I would save like crazy and have some good hard cash that you can use for the downpayment. 

[DallasLoanGuy]

underwriter will NOT be swayed one bit.

now, it could affect dti and credit scores.... but i dont care if you bought 3 cars yesterday....  

[Anonymous]

Thanks for the input guys. I kick myself in ass every day for not having money put away for a downpayment. Over the past couple years ALL of my money has been going to debt... mostly car debt from buying, modifying and then selling for a loss. I almost have it all paid off with the exception of about 6 thousand (yea, I had a lot.  It started when I was 17... i'm 25 now). My goal is to have it all gone before buying a home, which leaves very little for a downpayment. I also do NOT want my fiance to contribute. It's my mess and i'll clean it up. She has about 3-4K in her bank right now, but i'm not sure how she plans to use it. I'm thinking maybe I pay off what I can until February-March, then use the last few months for a downpayment. Our DTI might increase a little but it will get away from needing to use a CC.

My uncle who is an underwriter had suggested that if we HAD to use a CC, to take it out and let it sit in our savings for 3 months before trying to buy. This will however prevent me from getting financing through him, I would think. lol

Would it be a bad idea to hold off on some of the debt and save up for a downpayment? I've always been against the idea of buying with revolving debt, but a few thousand might be ok. I suppose I can pay that off with the tax credit.

Also, will the underwriter use her FICO since she is much higher? We want both names on the loan. I'm around 700 right now, and thats due to a couple cards with high util and young history. I have zero baddies.

[Anonymous]

With FHA, the credit won't matter, over 700 will be more than fine.  Have the seller pay the closing costs as using the CC will scare the underwriter if you do it close to the time of purchase and will hit your credit scores as utilization jumps.  If you wanted to do it 3 months ahead (so it is clear when they ask for 2 months of statements) that would probably be OK but would be alot of interest paid.  I would just have seller pay the costs and then when you get the 7500, pay it towards either your mortgage principle, or any high interest debt you have.

[Anonymous]

Cash is King. 

My opinion (because I am doing the same) Is to pay the monthly required installment payment and put the rest in savings. 

The only debt I have is my car and it drives me nuts that I don't send more than the monthly payment right now, but I know that the $8,000 I will accumulate in savings verses lowering my car balance is what is important....Once I buy my house I will send a couple grand to the note to make up for only sending the minimum right now.

[Anonymous]

I was told with FHA the seller cannot pay for all of the closing cost, just partial?

I WISH all I had was my car debt... I am going to be more excited about paying off my CC than I will be when I close on a home....Or close.

[DallasLoanGuy]

---

@Anonymous wrote:

I was told with FHA the seller cannot pay for all of the closing cost, just partial?

---

That is inaccurate