Debt to income

[daninicole]

My husband and I recently sold our townhome. We are living with parents while we save and pay down bills. We recently sat down with a lender to see our credit profile and to get to work on some things before we attempt to apply for a mortgage. After visiting the lender it is a given that husband will probably have to get the loan in his name only. My credit is not great and it is gonna be some time before it is up to par (we would like to have the home no later than this time next year, hopefully before that). I am rehabbing my student loans, have 1 charge off and 1 judgement ( paid) a tax lien (paid) and few lates. Hubby on the other hand only has a few lates received earlier this year when we hit a patch. The house we want is about $240k-$250k (we are looking to build and the price changes with the dollar per square feet fluctuating. Hubby makes $82k a year and only has car notes, personal loan, and timeshare. He does have credit cards which we are working to pay off before we attempt to get a mortage so I am not including them in the debt.  His student loans are in forebearance and we are trying to have them forebeared one more year while we attempt to obtain a mortage. My question (finally) we have 2  cars and we are joint owners on both and since I will not be on the loan will it seem as if he has 2 car payments that he is making on his own and have that to added to his debt therefore making the ratio to high? Once the bills are paid off his monthly debt will be 

personal loan $215

timeshare $192

car note 1 $771

car note 2 $557 

He pays car note 1 and I pay 2. The rest of the bills are paid together. Again I wanted to know if it will seem as if he as 2 car notes he is paying on his own monthly, since my income cannot be added because I will not be on the mortgage loan.

[StartingOver10]

Well, you do have time to get this done. Some people here have been able to make great strides in rehabbing their credit quickly in a matter of months.

Couple of questions: are you in a community property state or not? Are you planning to go for an FHA loan or conventional loan? Do you have down payment funds or are you working toward saving your down payment over the next 12 months?

If you are in a community property state, all the answers are different because your debt would count even if you aren't on the loan officially.

Assuming you are not in a community property state, you would have to prove that the car loan is being made by you. It is much easier to prove if the loan is in your name and you are making all the payments. If you have a joint bank account, much more difficult to prove.

Do you have separate bank accounts? Do you pay your auto loan out of your own account? Can you print up all the ACH payments (or however you pay) showing you are the sole person making the payment for your auto loan that is in your husband's name?

If not, can you refinance the auto loan into your name after you have built up your credit a bit? (Check the rebuilding section here on MyFICO for help).

Right now, at first blush, your husband is using 26% of his gross income toward those debts (personal loan, 2 car payments and the timeshare). So this will severely limit how much he qualifies for with the new home. There are two ways to fix it: Get more income (add you to the loan) or reduce the debt (including shifting some to you). Shifting debt doesn't work in a community property state.

It would be much better too for your husband to do something with the large payment he is making on his auto. Is there anyway he can refi it into a longer period to reduce that large payment? Or is the loan a new loan?

How much is owed on the personal loan (balance)? Is it something the two of you can knock out prior to purchasing the new place?

How about the timeshare? I know those are difficult to sell (you might even want to keep it!). I am just looking at ways to reduce all that remaining debt.

You made a good decision on selling your current place and moving in with your parents to get on your feet. You might need to consider some more drastic measures to get yourself in line so you end up with a good mortgage in the long run.

[daninicole]

StartingOver

Yes I have heard great things about the rehab process. I  make my last payment this week and hopefully things will move quickly. We are in Georgia so it is not a community state. We are going FHA unless we get  advice from a mortgage lender to go another way. We don't have seperate bank accounts but both of our pay checks get deposited into our account.Our  plan is also to try and pay off the personal loan so that will help. 

Thanks!!