Need advice about CC balances Vs. DP

[shyeviolett]

Hi there! I've been reading for a long time but first time posting. 

I'm looking to buy a house in June of next year. My scores are all mid 700s and I am at about 15% (25000 available) utilization of my credit cards, clean report. 

However, my husband has lower scores because of his credit card balances. Truly we could have paid these way down but we are way overpaying for rent and we haven't taken it seriously enough. Til now. So here's the situation- we could either get his balances to about 20% utlilization but only save about 10k for down payment. OR we could get them to 50-60% utilization and have about 18-20k down payment. His credit scores are currently in the high 600s, clean report. 

Our HHI is 120k and we'd be looking at 200k-ish houses. Both been at our jobs for 8 years, been renting the same apartment for 5 years no late payments. 

Thoughts? Thanks!!

[JM-AM]

Mortgage loans arent based off your UtIL. They are based on your DTI.

So you have to look at the monthly payments not the total balance.

200k plus home is well within approval.

Depending on type of loan you are considering will depend on how you should proceed.

[shyeviolett]

Ah. Ok, thanks. 

Calculating that now. That would not include current rent amount, correct? Not sure why it would. 

Just student loans, revolving debt, car loans? 

Roughly calculated, It looks like DTI ratio is around 17% currently. 

I'm hoping for a conventional loan but not sure without at least 10% DP. 

[JM-AM]

Your DTI is fine.

You can do Conventional with 3-5% down but it may not be beneficial considering your husbands lower score would keep you at a higher rate.

If you qualify for VA that is a good alternative, if not you may consider FHA since the rate will be lower.

Many try to compare the PMI between Conv and FHA but the simple truth is you will pay PMI on both. Granted PMI will be less with Conv but if you have a lower rate with FHA it can balance itself out to be equal or close to equal.

Just wanted to let you think more about your options. You can qualify now if you have down payment and you may have to have closing cost also depending on who is paying them or can be rolled into loan.

[shyeviolett]

Thanks so much! 

Not eligible for VA unfortunately but FHA is interesting. Considering the DTI info I think I'll focus on the DP and try to get that to at least 10% instead of trying to pay down balances. I've got about 15 months so it should be do-able  

[JM-AM]

FhA only need 3.5% downpayment.

You can always pay your loan off sooner by paying more to the principle every month after you are in your new home especially if your rent is off the wall.