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Posts: 18
Registered: ‎04-03-2013
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Home Equity Loan-With High DTI

I am looking for a lender that will allow me to take out a home equity loan against my home. I am looking to pay off a majority of my credit card bills. Currently my DTI is around 48%. Based off the information that I have received in regard to my home value,  by taking the equity and paying off my credit cards, I can get my DTI lower to around 40% My front end ratio will be around 28% (that will be worst case).  My credit utilization is at 92%.

 

How do lenders look at this? Will they consider paying off my credit cards and therefore go with the DTI minus my credit cards that I will pay off or will they consider the credit cards and the new monthly loan payment, which will probably increase my DTI to around 51/52%?

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Posts: 1,544
Registered: ‎12-16-2014
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Re: Home Equity Loan-With High DTI


ilkhats44 wrote:

I am looking for a lender that will allow me to take out a home equity loan against my home. I am looking to pay off a majority of my credit card bills. Currently my DTI is around 48%. Based off the information that I have received in regard to my home value,  by taking the equity and paying off my credit cards, I can get my DTI lower to around 40% My front end ratio will be around 28% (that will be worst case).  My credit utilization is at 92%.

 

How do lenders look at this? Will they consider paying off my credit cards and therefore go with the DTI minus my credit cards that I will pay off or will they consider the credit cards and the new monthly loan payment, which will probably increase my DTI to around 51/52%?


I think this will be a bit of a struggle.  Lenders view high CC utilization as a sign of financial distress so getting approved could be a challange inofitself, when you add on the DTI ratio issue this makes it a bit tougher.  I am not sure they will count on you paying off your cards because they cannot require you to do so and many folks that have done this in the past turned around and ran their cards up again so the potential of adding to the DTI is there.  

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Posts: 366
Registered: ‎01-22-2015
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Re: Home Equity Loan-With High DTI


workingfor850 wrote:

ilkhats44 wrote:

I am looking for a lender that will allow me to take out a home equity loan against my home. I am looking to pay off a majority of my credit card bills. Currently my DTI is around 48%. Based off the information that I have received in regard to my home value,  by taking the equity and paying off my credit cards, I can get my DTI lower to around 40% My front end ratio will be around 28% (that will be worst case).  My credit utilization is at 92%.

 

How do lenders look at this? Will they consider paying off my credit cards and therefore go with the DTI minus my credit cards that I will pay off or will they consider the credit cards and the new monthly loan payment, which will probably increase my DTI to around 51/52%?


I think this will be a bit of a struggle.  Lenders view high CC utilization as a sign of financial distress so getting approved could be a challange inofitself, when you add on the DTI ratio issue this makes it a bit tougher.  I am not sure they will count on you paying off your cards because they cannot require you to do so and many folks that have done this in the past turned around and ran their cards up again so the potential of adding to the DTI is there.  


w4 850,

 

I'm curious about your response.

We initiated this process last yr and the lender approved us based on them paying the individual lenders directly, no proceeds were to be disbursed to us personally. Perhaps different lenders have their own policies?

Frequent Contributor
Posts: 287
Registered: ‎12-20-2016
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Re: Home Equity Loan-With High DTI


ilkhats44 wrote:

I am looking for a lender that will allow me to take out a home equity loan against my home. I am looking to pay off a majority of my credit card bills. Currently my DTI is around 48%. Based off the information that I have received in regard to my home value,  by taking the equity and paying off my credit cards, I can get my DTI lower to around 40% My front end ratio will be around 28% (that will be worst case).  My credit utilization is at 92%.

 

How do lenders look at this? Will they consider paying off my credit cards and therefore go with the DTI minus my credit cards that I will pay off or will they consider the credit cards and the new monthly loan payment, which will probably increase my DTI to around 51/52%?


Different lenders, different rules on DTI. Ever considered a cash out and let the bank disburse the funds to the CC companies?

Mortgage Loan Officer in the Greater Chicago area and in 46 different states.
New Member
Posts: 7
Registered: ‎03-14-2012
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Re: Home Equity Loan-With High DTI

They will pay off all the credit cards, loans directly to get the DTI within regulations with no cash out. However this can get some people into deeper crap if they max out their credits cards again and basically double their debt with their house on the line. I am getting a HEL with a local FCU and they are paying off $50K in CC debt with no cash to me. 6.95% for 20 years but will pay it off in less than 10. I do not recommend a HELOC. The banks are pushing them so that means it's not as good as a HEL.

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