Car Note - payoff before refi?

[Duncanrr]

I have 7 payments left on my car loan then its fully paid off.  Im planning on refi my house in the next 4 months (I had to push this back from last year).  Would it be better to pay off the last 3 month payments early before I refi house?  My car note is $390/month.  Wondering how they would factor DTI ratio when there is really only a couple months left.  If they still include the full $390/month in the DTI ratio calculations then I think it would be best to pay off early.

Thoughts?

[GRate]

Yes, full monthly payment would be used even if a few months left. If your DTI is fine with the car payment, you do not have to wait to pay it off. Refi while rates are still low and before they move up very soon.

[BrianB_The_Loan_Professor]

On oayments less than $100 and less than 10 months left we can get the payment omited 

when it is a higher amount they will include it - as mentioned above if it is a determining factor in your ability to refi or the rate you will receive pay it off - of not no need

Brian

[StartingOver10]

This varies lender to lender. Some use the payment right up until it is actually paid off, others won't count the debt if less than 10 months and still others require less than 6 months.

Never heard of the $100 amount quoted above, but each lender sets their own overlay.

[BrianB_The_Loan_Professor]

http://documents.efanniemae.com/sf/guides/duguides/pdf/current/rndug0909.pdf

pg 8

FHA & VA – Installment Debts
In this release, Fannie Mae will also update the way DU handles installment debts for FHA and VA loan
casefile submissions. DU will exclude payments on installment debts that are less than or equal to $100, when
there are less than 10 months left to pay on the liability. Months Left to Pay is determined by the information
sent in the 06L-120 segment of the 1003 file. This field is not accessible via the online loan application in the
DO/DU user interface, but could be populated via DO/DU’s credit liabilities auto-population feature. If an
amount is disclosed in this field, DU will use it to determine if the liability has less than 10 months remaining.
If this field is blank, DU will calculate the months left to pay using the balance and monthly payment amount
entered for the installment debt. The messages issued when installment debts are excluded from the
borrower’s expense ratios will be updated as follows:
Desktop Underwriter has excluded installment debt with less than 10 months remaining and less than
or equal to a $100 monthly payment from the borrower(s) expense ratio calculation. Please refer to the
Online version of HUD Handbook 4155.1, Mortgage Credit Analysis for Mortgage Insurance to exclude
additional installment debt based on FHA policy.
Desktop Underwriter has excluded installment debt with less than 10 months remaining and less than
or equal to a $100 monthly payment from the borrower's expense ratio calculation. Please refer to the
VA Lenders Handbook to exclude additional installment debt based on VA policy.

it has been around for a few years now - the automated system will count any debt over 100 payment - banks may overlook it but for an automated approval it gets added in

B

[StartingOver10]

Thank you BrianB!