topic Re: Prior to FHA app; pay down credit cards or hold onto cash for downpayment closing costs? in Mortgage Loans

Prior to FHA app; pay down credit cards or hold onto cash for downpayment closing costs?

noobafterbk — Sat, 06 Feb 2016 07:05:16 GMT

So i wanted to see the best plan of action, we will be applying for our morgage in April, 2 years post BK7. we have approx 9k in outstanding credit card debt

we have got around 14k for a downpayment and closing costs (looking at 200k home) Our DTI should be ok, household income is 100k and both have solid work history and perfect payment history since BK. My FICO 5 is average 694 wifes is lower but cleaning up her scores now.

My question is, would it be better to pay off the credit cards to zero prior to applying; or should we use the 9k to add to the downpayment ? I dont think the 9k debt will make a big difference on our DTI. Any help would be appreicated.

Re: Prior to FHA app; pay down credit cards or hold onto cash for downpayment closing costs?

StartingOver10 — Sat, 06 Feb 2016 12:58:29 GMT

@noobafterbk wrote:
So i wanted to see the best plan of action, we will be applying for our morgage in April, 2 years post BK7. we have approx 9k in outstanding credit card debt
we have got around 14k for a downpayment and closing costs (looking at 200k home) Our DTI should be ok, household income is 100k and both have solid work history and perfect payment history since BK. My FICO 5 is average 694 wifes is lower but cleaning up her scores now.
My question is, would it be better to pay off the credit cards to zero prior to applying; or should we use the 9k to add to the downpayment ? I dont think the 9k debt will make a big difference on our DTI. Any help would be appreicated.

What is the mid-score? The lenders don't use the average scores - it is the lowest mid score of the borrowers on the loan.

As to the $9k, keep it available for the home purchase or in your savings for unexpected expenses. You might need it to pay down something of your debt, but your LO would be able to better tell you which debt to pay down, if any,

Re: Prior to FHA app; pay down credit cards or hold onto cash for downpayment closing costs?

CWESTL — Sat, 06 Feb 2016 15:13:48 GMT

It may be wise to have the $9k balance on one credit card. This may help with maximizing your score and list only one monthly payment amount that will count against your DTI ratio. It is important to note that FICO scores listed on myFICO aren't necessarily representative of the mortgage weighted score a lender may ascertain. The FICO 8 scores I obtained from myFICO weren't the same scores my lender's scoring model calculated. This actually benefited me a bit with mortgage weighted scores of 742, 738, and 716. The mortgage broker, etc. would be able to give you more guidance. Each lender has minimum industry standards and some overlying standards depending on how risk adverse a particular lender may be or whether they intend to fund or sell the loan.

Re: Prior to FHA app; pay down credit cards or hold onto cash for downpayment closing costs?

StartingOver10 — Sat, 06 Feb 2016 16:23:33 GMT

^That is why we suggest pulling your FICO mortgage scores here before making application. That way you know your actual mortgage scores rather than trying to guess with the FICO 8 version.