Husband and I are looking to buy a home this summer. We live in Texas so Unfortunately my debt is a burden. Currently our FICO scores are in the 700s with our Mortgage scores also in the low to mid 700s. He makes 44k a year. I make 22k. Our current rent is $1,100 and our car note is $275. We've been approved for a loan of $19,000 with a monthly payment of about $390. Below is our current debt.
Balance Monthly Payment
Discover $14,471 $290.00
Wells Fargo $3090 $31.00
Ebay MC $2395 $60.00
Paypal $2026 $60.00
B of A $2575.00 (recent balance transfer. Unsure of monthly payment)
B of A $4537.66 $162.00
Us Bank $1346 $52.00
The Us Bank card is my husbands only card with a balance. Thinking of Paying off the two largest and then lowering the balances on the others. Is an installment loan like a debt consolidation loan viewed differently as credit card debt? Would it hurt our credit to apply for the loan now? We plan to start shopping for mortgages in April or May. Any advice would be greatly appreciated!!
Your debts are only a burden if you're going to be on the mortgage or if your husband is applying to an FHA or USDA mortgage.
So what type of mortgage do plan on applying for?
Based on the information you've provided, the best case scenario is you pay off the Discover Card at $290 per month & the Bank Of America account at $162 per month for a net savings of $62 per month. That extra $62 per month roughly equals $12,500 on a mortgage.
Does that make sense?
Who has the car loan & the majority of the credit card debt?
We were hoping for an FHA or USDA loan but a Conventional is fine if we can get one. Most of the credit card debt is mine. Since we live in Texas, I thought my debt was his debt. Is that not the case with a Conventional mortgage? The car is under both our names and has $9500 left. My husband only has a US Bank card with a balance of $1300.
The only time you have to count a non purchasing spouse's debts in a community property state is if you're doing an FHA or USDA mortgage.
Where are you looking to buy?
The loan option will likely be determined based on your debt to income ratios based on the price point you're looking in.
FHA is going to give you the most flexibility on your debt ratios (up to 56.9%) followed by conventional (up to 50%) and then USDA.
There are a couple of conventional programs that only require 3% down but they have county income limits which is why I asked where you're looking to buy.