DTI questions

[compassion101]

Looking at Nerd Wallet's how-much-can-i-borrow-calculator with my current DTI it says I they recommend me taking out a loan no larger than 296k but that a lender might approve me for as much as 425k. That's using only my main income and not my side income or my wife's income, as that is probably all I will use when applying for a mortgage. My questions are these:

1. I used $200 as student loan monthly payment, but honestly my payment is currently $0 though it will return to $200 in January. What are lenders currently considering monthly payments for student loans? 
2. I plan to pay off some credit cards (40k balance currently all at 0%) to make the DTI better. Paying off half my credit cards (20k) brings my numbers to 367k/496k. Does that seem reasonable that I could still buy the house with 20k of credit card debt? It just feels funny to me and want to make sure that it isn't out of the ordinary.
3. Instead of paying the 20k of credit cards, I could pay 7k to pre-pay the rest of the lease on my car. If I do that then my numbers jump to 410k/508k which is probably more than I need. The question to me is a) would the lease report as $0 monthly payment and b) same question as #2 #above, is it reasonable to have 40k in credit card debt when buying a house given that my total DTI is decent as I would have no other debt than small college loan?

[dragontears]

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@compassion101 wrote:

Looking at Nerd Wallet's how-much-can-i-borrow-calculator with my current DTI it says I they recommend me taking out a loan no larger than 296k but that a lender might approve me for as much as 425k. That's using only my main income and not my side income or my wife's income, as that is probably all I will use when applying for a mortgage. My questions are these:

1. I used $200 as student loan monthly payment, but honestly my payment is currently $0 though it will return to $200 in January. What are lenders currently considering monthly payments for student loans? 
2. I plan to pay off some credit cards (40k balance currently all at 0%) to make the DTI better. Paying off half my credit cards (20k) brings my numbers to 367k/496k. Does that seem reasonable that I could still buy the house with 20k of credit card debt? It just feels funny to me and want to make sure that it isn't out of the ordinary.
3. Instead of paying the 20k of credit cards, I could pay 7k to pre-pay the rest of the lease on my car. If I do that then my numbers jump to 410k/508k which is probably more than I need. The question to me is a) would the lease report as $0 monthly payment and b) same question as #2 #above, is it reasonable to have 40k in credit card debt when buying a house given that my total DTI is decent as I would have no other debt than small college loan?

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1. Depends on the loan type you are going for. You may need to take the SL out of forbearance for the $200 payment to count towards your DTI instead of 0.5 or 1% of the principle 

2. DTI and borrowing power is all about minimum payments and income not total balances. Can you get a mortgage with that much debt? Yes. Should you is a question only you can answer 

3. I am unclear if you are paying off the car or just paying it down.  If just paying it down (and there is more than 10 payments left after pay down) then the lender will use the normal payment amount for DTI calculations. If you are paying off the car, the account will report as closed with a $0 balance. 

[Anonymous]

@dragontears Gave the answers I would give. I would add to the lease parameter: that lease payments are usually counted in DTI calculations even if payments remaining are less than 10. The bank knows you have to either lease a new vehicle or buy the current one at the end of the lease, so underwriting has to include that. At least looking at FreddieMac UW criteria, not sure if FannieMae is different.

[compassion101]

Thanks, that makes sense. I think I'll forget about the lease pay off idea then. I can buy the house and still pay off the rest of the credit card debt within a year, so I don't mind carrying it, just wanted to confirm that lenders are only concerned about the monthly payment. I have about another 40k actual income above the income that will qualify me.

[4sallypat]

Those online calculators don't give you a real picture of what you can afford.

I used one from my CU and it said $300,000 max loan.

I went to Better.com and they did a SP and said I can go up to a $550,000 loan.

Confirmed that amount when I asked for a pre-approved desktop UW package (hard pull, income verification, tax statements, bank statements)....

[JVille]

You should be concerning yourself with your 3 Fico Mortgage Scores in addition to DTI.