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Lower down DTI before mortage, Refinance auto loan?

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Anonymous
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Lower down DTI before mortage, Refinance auto loan?

Hi,

 

I am first time home buyer and been doing  a lot of home work, reading and educate myself before i get the ball rolling.  Went to a few local bank, including big bank and CU to see where we stand by playing around with number of our income VS our debt.

 

Here is the deal my wife and I income are about 110K combined, but our DTI are really high and I would like to know if this is a good ideas.

 

Here is the debt we have

auto loan 1: 675$/m

auto loan 2: 288$/m

auto loan 3: 260$/m

personal loan 1: 135$/m

personal loan 2: $140/m

 

my biggest debt is 1200$/m that will count torward my DTI.  We have about 70K cash of asset in the bank for mortage, in order for us to pre-approval for 300K where we want we have to pay off our debt.  Here is my plan, we have no problem to pay off our debt in RED, HOWEVER that leave us with our auto loan $675 (new about 6months, 40K balance) and our DTI still high because of this auto loan plus $1200/m debt. Also that leave us with 40K cash for the mortage.  We are planning to put 3.5% down payment plus closing cost so we would have to put 20K toward the mortage and 20K left. 

 

Botton line would it be GOOD ideas if we put 10K-15K toward our large auto 40K ,$675 a month. Then re-finance it to longer year and lower down our payment.  If we can lower down our payment to $400-$450 a month our DTI would qualify us for the amount we want.

 

auto loan 1: 675$/m

auto loan 2: 288$/m

auto loan 3: 260$/m

personal loan 1: 135$/m

personal loan 2: $140/m

 

Message 1 of 4
3 REPLIES 3
kaylord84
Frequent Contributor

Re: Lower down DTI before mortage, Refinance auto loan?

For FHA with one compensating factor your DTI can be 37% front / 47% rear .with that amount saved your ratios can be this high

Starting Score: Eq 485 TU 467 Ex 400 BK filed Dec 2016
Current Score: Eq 723 TU 665 Ex 682
Goal Score: 700 All 3


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Message 2 of 4
StartingOver10
Moderator Emerita

Re: Lower down DTI before mortage, Refinance auto loan?

Speak to your LO.  Find out if the $675 car payment is okay after you pay off all the other debt, you may not have to do anything.  If s/he says you need to refi the car loan, then that is the time to do it. Your LO is key in this, use their knowledge of your file to your advantage.

Message 3 of 4
DallasLoanGuy
Super Contributor

Re: Lower down DTI before mortage, Refinance auto loan?

your loan officer can check off those debts as 'paid by closing' and the automated underwriting will account for that in the dti and cash reserves when it spits out the approval.

i would have your loan officer do that instead of trying to pre-approve yourself in a myfico forum.

 

Retired Lender
Message 4 of 4
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