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Went for pre approval today, had dreams shattered

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Anonymous
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Re: Went for pre approval today, had dreams shattered

If you are leasing your vehicle, could you pre-pay the lease to knock the car payment out? If you own, then you could trade the car in and get a cheap beater as someone else suggested. If you were doing 20% down, could you use that to pay down some debt and then put 5% down instead?

 

Lastly, there is the option of enrolling in school again to simply defer your student loans. There are lenders who won't count the payment against you if it is deferred at least 12 months out. 

 

These are just suggestions to gain approval, not financial advice. I currently have $85K in student loans and am on a "faster-track" payment plan at my choosing. My monthly student loan payment is $1300, which is also what my mortgage payment is lol. I say this because I'm glad I was in my repayment period for student loans and that they factored this into my DTI because it painted a more realistic picture of where I should be financially and has built in a great cushion (ability to save 12+ payments in case of job loss, repairs, general home maintenance). 

 

Regardless of what you decide to do, don't give up because you have many available options. Have you considered a mortgage broker? Good luck!

 

 

Message 11 of 19
wa3more
Established Contributor

Re: Went for pre approval today, had dreams shattered

Don't give up.

 

Cheap rates will be here for a while and you will get a chance to buy. Just keep working on your finances.

 

Look for mortgage at 2-3x your annual income. Don't let a lender tell you what you can afford.

Message 12 of 19
dman23
Frequent Contributor

Re: Went for pre approval today, had dreams shattered

What is a satisfactory DTI for a conventional mortgage?

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Message 13 of 19
cartwrna
Valued Contributor

Re: Went for pre approval today, had dreams shattered

43-45% with the new mortgage included in that.
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Message 14 of 19
dman23
Frequent Contributor

Re: Went for pre approval today, had dreams shattered


@cartwrna wrote:
43-45% with the new mortgage included in that.

Thank you.

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Message 15 of 19
Ragelog
Established Contributor

Re: Went for pre approval today, had dreams shattered

Believe it or not it is to protect you. 59% DTI means after taxes you have the bare minimum to live off of typically. Unless your income is really high but at that point you'd likely be able to buy a 120k condo with nearly cash.

 

My advice pay off debt. I would consider sell the car and buy something cheap with cash to lower DTI then buy a car after if you must.

 

I am looking at a USDA loan their max DTI is 41%.

 

I have child support fortunately no Student loans or Car loan.

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Message 16 of 19
dman23
Frequent Contributor

Re: Went for pre approval today, had dreams shattered


@Ragelog wrote:

Believe it or not it is to protect you. 59% DTI means after taxes you have the bare minimum to live off of typically. Unless your income is really high but at that point you'd likely be able to buy a 120k condo with nearly cash.

 

My advice pay off debt. I would consider sell the car and buy something cheap with cash to lower DTI then buy a car after if you must.

 

I am looking at a USDA loan their max DTI is 41%.

 

I have child support fortunately no Student loans or Car loan.


Good advice. Lenders DTI requirements are to protect themselves from making a risky loan.

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Message 17 of 19
Imperfectfuture
Super Contributor

Re: Went for pre approval today, had dreams shattered


@StartingOver10 wrote:

@Anonymous wrote:
I obviously don't know your situation,, but a friend of mine had a similar position. He sold his car, then bought a junker for 2kk and had no car loan! His dti was then good enough.

^^^This!   I see so many borrowers knocked out of an approval for the amount they want (or blocked out entirely for a mortgage) due to their vehicle payments.  This is the solution above. 

 

Sometimes student loans will interfere, but it you have them out of deferment then the lender can use your actual payment rather than estimating the 1% or 2% they now require.  

 

OP, don't lose hope.  Calculate your monthly debt payments and figure out a way to get it reduced to within acceptable levels. Use your new mortgage payment for the front end and your total monthly debt payments + the new mortgage payment to calculate the back end. As pointed out above, FHA has much higher allowed ratios (56.99% for the back end) so you stand a much better chance of getting an FHA approval rather than going conventional when you have higher debt loads. 


My CU lists Auto Insurance, though not medical insurance, as a required debt.  So that can drop with paid off car.

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Message 18 of 19
Lemmus
Established Contributor

Re: Went for pre approval today, had dreams shattered

...there are really two distinct approaches to your problem ...but you may have to first step out of your comfort zone  

 

...first of all, a "no" from a single lender means almost nothing ...it gives you a bit of needed insight but its not the gong of death to your hopes

...even if you had gotten a "yes" on your first attempt, common sense says you want to get other lenders involved to get the best loan available for you, not them

...so start visiting other lenders, mortgage bankers, and mortgage brokers ...every single one of them has different criteria and most have a variety of loan programs available 

...your DTIR problem won't go away ...and it is a real problem as others have pointed out ...but its less of a problem to some lenders than it is to others

...I see many people posting on this board who start and end with a single lender who for one reason or another they first approached ...some feel an obligation to the lender to use them from that point forward ...but that is a fallacy that can cost you significantly in many ways ...so ditch that lender and call on several others

 

...btw, get a copy of the three CRA credit report the first lender pulled on you ...they are obligated to provide it ...make a copy of it ...then use it in your initial discussions with other lenders ...don't let them run up a bunch of unnesessary inquiries on you if they can't help you anyway ...technically, mortgage inquiries within a certain time frame are supposed to count only as one inquiry ...but that is often not the case ...don't risk it unnecessarily

 

...the other path, as stated in previous posts, is to reduce your debt service ...this can mean doing things you'd not normally find yourself doing ...selling your car, going back to school, renegotiating your SLs are all mentioned above ...but you may need to be a tad more inventive ...xfer cc debts between accounts to lower your monthly minimums on which your DTIR is calculated for instance ...although ccs differ, many minimums are based on simple ranges that allow some maneuver room ...you will find a lot more creative ways to restucture your debts in the Credit repair forum w/o harming your credit ...the above is just one idea ...another approach that may not be so obvious is an unreported loan from an individual close to you and use it to pay off one or more of your reported debts ...yet another, if your auto loan is more than 6 mo old, made when your scores were significantly lower, and all payments were on time then you can almost certainly refinance it at a much lower rate as well as stretch out the payments, both of which will lower your DTIR ...I lowered my auto payment in just that manner by more than a hundred a month with no out of pocket expense ...look on-line for brokers that specialize in such loans ...none of these approaches are illegal or unethical, you simply take advantage of what the system offers you

 

...what ever you do, don't give up hope ...you may have to step out side of the box more than you usually would have ...but believe me, the air can be good out there ...hth


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Message 19 of 19
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