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HELOCs, Utilization, etc. Looking ahead to re-fi

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HELOCs, Utilization, etc. Looking ahead to re-fi

I purchased a small farm last summer.  At the same time I signed an option on the surrounding farmland that expires this December.  Family situation has changed and I won't be able to pick up all 43 acres on the option, but I'm hoping to get a minimum of 7...ideally about 19.  7 would bring be over 10 acres which means my taxes would stay agricultural without having to prove $2500 of farm-related income per year.  19 would mean I could get teh portion of the property I really love.  Either way, the farm buildings would increase in value (a 7000 sq ft barn has very little value on less than 4 acres unfortunately).  So I've been working to get my debts paid, my DTI in a good place, savings in place, etc.  And, here I am... with a couple questions.

 

* I have a HELOC on the farm.  Less than $5000 balance on a $15,000 HELOC.  it was to cover the portion of the purchase that I couldn't get from the bank (it was initially owner financed and the HELOC paid off the previous owner).  Is a HELOC considered revolving or mortgage debt? 

 

* I could pay the final bit of my credit card off with my savings, but am wondering if it's better to leave a small amount on it (by December we're talking just shy of 20% of the credit limit of the card) and have a bit more in savings.  The scenarios are... 19+% utilization on the card with about $3700 in savings... or 0% utilization on that card and less than $2000 in savings.  I do have the HELOC in addition to this card and if it's thought of as revolving credit, the total utilization if I leave the cash in savings would be just over 20% total (28+% on the HELOC and 0% on a store card and a Visa, in addition to the 19+% on the Mastercard).  Thoughts?  I was thinking of leaving the cash in savings to cover things like closing costs, survey expenses (if the current owner is ok with me getting the 19, 1 parcel will need to be officially split so I am assuming I'll have to cover a new survey and deed), etc.

 

* Obviously 0% is the best and it would vary by lending institution, but what is considered a "good" DTI for refinancing?  Do they look at current DTI with current mortgage information as a first step and then the future with the potential refi mortgage information to make sure you're ok or only 1 of them?   Also... I haven't pulled my credit since I paid off my truck loan a couple months ago.  A little nervous (that whole "don't want to be told no" thing), but I know it's better to know going in than be surprised when I get there.  Are they still looking at a minimum of 620 or better or has that changed recently?  I shouldn't have ANY problems with the 620... just curious.

 

Thanks for the help!

12/09 - EQ 683, TU 696, however hubby's EQ is 599 - guess what we're working on next!
1/4/10 - EQ 700!
5/7/10 - Midline score = 712! Hubby's EQ is now 613 :-)
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Community Leader
Super Contributor

Re: HELOCs, Utilization, etc. Looking ahead to re-fi

HELOC's are normally reported as revolving, but I've noticed some reporting as mortgage's as well.


As far as the DTI is concerned, with the new proposed payment, everything should be kept at no more than 45% of your gross monthly income.

 

I am a little confused on what you are refinancing though... the less than $5k you owe on your HELOC on the farm?  Into a new less than $5k loan?

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New Contributor

Re: HELOCs, Utilization, etc. Looking ahead to re-fi

Thanks shane.  guess I just need to pull my credit and find out how they're reporting the HELOC and go from there.  I haven't pulled it since I bought the farm last year.

 

Why am I looking to refinance the entire property?  In order to pick up more land.  I have an option on the surrounding farmland but in order to JUST purchase it, I need 20-35% down on a land-only loan.  Can't do that.  If I can refinance the whole farm to include the land, I should have enough equity in the farm (with the 17% plus the increased value in things like the barn) to not have to come to the table with much more cash and still keep 15% equity which is the minimum that I believe I can get away with as my local Farm Credit will probably be who I go through for the loan.  At least that's what I'm hoping to be able to do (and was told may be possible).

12/09 - EQ 683, TU 696, however hubby's EQ is 599 - guess what we're working on next!
1/4/10 - EQ 700!
5/7/10 - Midline score = 712! Hubby's EQ is now 613 :-)
Message 3 of 4
Community Leader
Super Contributor

Re: HELOCs, Utilization, etc. Looking ahead to re-fi

Interesting refinance scenario, I can see how it'd be done but it seems something a local lender would certainly be needed for.  Hope it works out.

Helping people with Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
In Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

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