Auto loan advice from an Underwriter

[Hammer23]

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@Revelate wrote:

With your experience (if you can describe it in general terms), can you talk a little about the auto-enhanced score?  The "first-time-buyer" penalty is well known both here on this fourm and elsewhere: anecdotally we know that someone with just credit cards is going to be slapped with this on their auto-enhanced scorhdere; however, as you suggest with a Prosper loan (personal loan, installment tradeline) being helpful as we've thought in the past, would you rate the other two installment loan types (auto ones being obviously counted) for their relative weight in the auto-enhanced score?

- Mortgage loan

- Student loan

Thanks!

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There are several different auto enchanced scores out there, Each model weights each item different. Most large lenders will use your report and load that into a custom score model or "scorecard" The scorecard is how the lender looks at your risk using a set of weights and measures that  the lender comes up with. 

For exampe, a first time buyer with 3 revolving lines and a student loan with a 787 Auto enhanced score. A scorecard may assess this adversly because of the lack of auto credit and maybe there are 4 or 5 inquires. So in this case the model says the customer will perform the same as a customer with a 630 credit score. In this case if an approval is issued it is given terms that a 630 customer would expect. 

In another example, we have a 585 credit score customer with poor revolving pay history, a 2 year old bankruptcy (with no lates since) who re affirmed the mortgage through the BK. Has 3 paid perfect autos before the BK. A scorecard may look favorably on this because of the positive auto credit and the reaffermation of the mortgage. In this case the model says this customer will perform the same as the average 680 credit score, so this customer is issued an approval and is given the terms that a 680 customer would expect. 

When I say auto loan, any installment loan (non student) is looked at the same. One of the notes that could be made supporting and approval is "no auto credit noted, however customer paid $150 personal loan payment well for 2 years" 

[Hammer23]

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@Anonymous wrote:

Hi. My husband and I have verybad credit with scores around 560. We are behind on our mortgage and havea often been late on our payments including auto, although the auto payments are always made. Our car just died and I think we're looking at quite an expensive repair, to where we shouldconsider buying a new/new used car instead. Our combined yearly income is about $160,000/year. We'd be looking at a loan of about $23,000. Do you think we can get a loan? We might be able to put some $$ down, like $3,000 or so. Any help and advice you can give would be greatly appreciated. 

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Your mortgage credit is going to be a hurdle in addition to your scores. If your auto history is good and you are able to make the downpayment, there should be options for you. Given your current situation, you should expect higher interest rates. My advice would be to go with the least expensive car acceptable for your needs. Pay the new loan well while you clean up your credit situation, then when your score rebounds, refinance or trade the unit for a lower rate.

[Hammer23]

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@SEACOASTNHMAN wrote:

what are the key factors that lenders are looking for to give a approval for a loan ?

thanks

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Everyone has heard of the 4 Cs of credit. Credit, Capicity, Collateral, and Charcter.

What I Iook for is 3 of the 4 to be present. If the Credit is less than perfect, what does the other 3 look like. 

Each case is different, you want to do your best to present yourself in the best light. It starts with situational awareness. A customer with poor credit looking to purchase a $40K unit with no money down and $35K per year in income, does not present well to an underwriter. 

The same customer looking at a $20K unit with $1-$2K down presents better because the customer appears to be aware of their budget. 

[Anonymous]

Hi there!!

Thank you so much for your advice.  Here is my situation:

I will be discharged from C7 bk any day now.  I decided not to reaffirm my car and will be getting a new one.   The scores in my siggy are with me added as an AU on my fiance's Capital One card with 3k limit/$68 balance.  Prior to that addition, my score was about 590-599.  

So, I included the one car in bk, no lates being reported on my Experian report.  I have a paid auto loan in 2007 for Capital One.  My income is about 56k per year and I do pay about 825 a month in rent.  

What can I expect when I go buy, as far as interest rates, approval, down payment, etc?  Which bank is my best bet?  Any other advice?  Thanks!

Oh.. will my fiance co-signing help?  He had a bk discharged in Oct 2011.  He has a car loan reporting for the past 6 months with Chase and he has the Cap1 card.  Thank you!

[webhopper]

As a GSM have you ever handled a NFCU loan check?
I'm using my NFCU loan check. The car was ordered Friday. I'm taking delivery overseas... does NFCU pay the dealer off of the VIN # and make/model of the car? We wont have a vehicle title til about 6 weeks after European delivery as the car will be in transit from Sweden to the US.

My dealership was worried that they would not get funded 30 days before I leave for Sweden; the program requires the car dealership to be paid at least 30 days before we fly out

[Hammer23]

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@Anonymous wrote:

Hi there!!

Thank you so much for your advice.  Here is my situation:

I will be discharged from C7 bk any day now.  I decided not to reaffirm my car and will be getting a new one.   The scores in my siggy are with me added as an AU on my fiance's Capital One card with 3k limit/$68 balance.  Prior to that addition, my score was about 590-599.  

So, I included the one car in bk, no lates being reported on my Experian report.  I have a paid auto loan in 2007 for Capital One.  My income is about 56k per year and I do pay about 825 a month in rent.  

What can I expect when I go buy, as far as interest rates, approval, down payment, etc?  Which bank is my best bet?  Any other advice?  Thanks!

Oh.. will my fiance co-signing help?  He had a bk discharged in Oct 2011.  He has a car loan reporting for the past 6 months with Chase and he has the Cap1 card.  Thank you!

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With your income and good car reporting before the BK, I would say you stand a pretty good shot. If you are going used I would suggest Cap 1 or Wells Fargo as options. You will want to wait until the discharge reflects in your credit report or be prepared to provide it to the bank. 

Having you fiance sign may help as well. 

[Hammer23]

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@webhopper wrote:
As a GSM have you ever handled a NFCU loan check?
I'm using my NFCU loan check. The car was ordered Friday. I'm taking delivery overseas... does NFCU pay the dealer off of the VIN # and make/model of the car? We wont have a vehicle title til about 6 weeks after European delivery as the car will be in transit from Sweden to the US.

My dealership was worried that they would not get funded 30 days before I leave for Sweden; the program requires the car dealership to be paid at least 30 days before we fly out

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I have in fact. NFCU checks are normally presented as a draft to the dealer with conditions that the dealer must meet both before cashing the check and after. Before the check cashes, there are normally restrictions on collateral type, age, and miles. If all of those are met the dealer can cash the check as long as they agree to the after sale conditions which are normally title and registration related. These normally include requirements for the dealer to present a completed title with NFCU's valid first lien within so many days (normally 30-45 days). Other conditions would be no lemon law or salvage vehicles, etc.

If the dealership takes too long to present the titkle or the car is a salvage or a buyback vehicle, the dealer must pay the loan off per their agreement when they cashed the check.

Being that your car will not have a title for an extended period of time, you would want to contact NFCU and see if this will be an issue. The dealership will more than likely not allow you to use the check if there is a timeframe that they cannot meet as they are financially liable to NFCU at that point. They will more than likely attempt to make you go with financing that they arrange through their captive. If this is the way you have to go, I would not worry, because you can always refinance with NFCU after the car arrives in the states.

[webhopper]

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@Hammer23 wrote:

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@webhopper wrote:
As a GSM have you ever handled a NFCU loan check?
I'm using my NFCU loan check. The car was ordered Friday. I'm taking delivery overseas... does NFCU pay the dealer off of the VIN # and make/model of the car? We wont have a vehicle title til about 6 weeks after European delivery as the car will be in transit from Sweden to the US.

My dealership was worried that they would not get funded 30 days before I leave for Sweden; the program requires the car dealership to be paid at least 30 days before we fly out

---

I have in fact. NFCU checks are normally presented as a draft to the dealer with conditions that the dealer must meet both before cashing the check and after. Before the check cashes, there are normally restrictions on collateral type, age, and miles. If all of those are met the dealer can cash the check as long as they agree to the after sale conditions which are normally title and registration related. These normally include requirements for the dealer to present a completed title with NFCU's valid first lien within so many days (normally 30-45 days). Other conditions would be no lemon law or salvage vehicles, etc.

If the dealership takes too long to present the titkle or the car is a salvage or a buyback vehicle, the dealer must pay the loan off per their agreement when they cashed the check.

Being that your car will not have a title for an extended period of time, you would want to contact NFCU and see if this will be an issue. The dealership will more than likely not allow you to use the check if there is a timeframe that they cannot meet as they are financially liable to NFCU at that point. They will more than likely attempt to make you go with financing that they arrange through their captive. If this is the way you have to go, I would not worry, because you can always refinance with NFCU after the car arrives in the states.

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NFCU said 90 days... We can use US Bank if need be for the financing, and then re-finance with NFCU if we have to. The dealership wanted me to go with this option as it is what they are most familiar with.   I called NFCU while in the dealerships finance guy's office, they said they don't need the title, just the registration, and we have 90 days to get that.

My credit is great except for a repo from 2006 that appears as a judgement on my EX report. (it does not appear on EQ or TU)

My husband's is not great, foreclosure from early 2010.  NFCU goes off of the primary applicant when determining rate, so that's why we went with NFCU since I felt like we needed my husbands income to be able to qualify for the loan (I carry two mortgage payments on my income, so my DTI is very high, my husband has no debt in his name b/c his credit is bad and we don't want to pay high rates). 

The car is 48.6k, income is 180k between the two of us (two w-2 jobs, rental income 2200 per month, child support 300 per month, VA disability pay 500 per month)

 The loan will be for 45k, we are putting 3.6k down as deposit + cash down. NADA retail on the car is over 50k.  Dealer Invoice with our options is 47.2k.  MSRP with our options is 50.2k.  My NFCU check says that they will pay up to 125% of NADA Retail price, so I think we are fine as far as the collateral goes, especially since we are putting cash down (45k was the most I was willing to finance).  

Also,  Oklahoma is not a title holding state... so NFCU has in their system that they don't need the title, they just need the paperwork saying that they are in 1st lien position.

Thanks for your advice... I'm definately more open minded as far as working with US Bank if we have to, now that I've gotten your input...

Thanks so much!

[Anonymous]

Thank you. 

How much should I be prepared to put down?  Is my interest rate going to be like 18%, do you think?

[davefromca]

Looks like a lot of good insight here, what do you think about my situation:

I need a new car, I'm pretty much decided on the Honda Fit as its price is pretty low and I like the car. (Expecting to pay low 17k out the door, and hoping to put 3000 down) Went on Myfico.com and got my EQ and TU scores, 741 and 712 respectively.

Quick credit history: I've had two previous car loans both paid off. I have a fed student loan that is 20% paid. I have 1 credit card, however my credit utilization on that card is 80%. I have nothing negative on my credit report, not even one 30 day late payment.

I want to secure the best rates for a new car but may have to finance for 72 months. (Santa Barbara isn't cheap) I dont mind payment a little bit higher interest for 72 months. Do you think my high credit card balance will force me to pay a higher interest rate though? I'm hoping by the time I buy the car I can be down to 60% utilization. There is a credit union with a really good 72 month rate (3.25) so I'm hoping to obtain a loan from them.

Thanks for your opinion.