Last year I tried to apply for a mortgage but my debt to income ratio was too high. I have a high income but because I'm self employeed and I had only worked for 1 year at current job when I applied they took that one year of income and divided it by two to use as my income. Now my debt to income has increased because my student loans that were on income based repayment are now on full normal payment and the monthly rate increased significantly.
We will be trying to buy a house by may or the summer. I refinanced one car loan 4-5 months ago dropping the monthly payment from 850 to 450. I paid off another car eliminating a 350 payment.
I have a vehicle with a 1050 payment.
I am considering making a large payment on the car loan and then after refinance it which I expect to lower the interest rate significantly, save a lot of money over the life of the loan and lower my payment from 1050 to 650 to help reduce the debt to income ratio.
I don't know anyone who can give me advice on what to do in this situation. FICO 8's are in the 780s. FICO mortagage is in the 750s. My credit scores normally recover within 2-3 months after a refinance because I have a large credit history and many open accounts, <5% credit utilization, perfect payment history.
Current payments are 450, 1050, 3650, = 5150 total per month. Income before taxes average over last 2 years is 30,000 per month. Desired mortage payment with property tax and insurance is 4,000 per month.
Should I do it? Refinance the car loan, reduce debt to income ratio?
Should I wait? No changes to credit and apply for pre-approval after I file income tax and buy the house this summer then later on refinance the car?
