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How should I time my application?

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Contributor

How should I time my application?

My score is not quite 620, I believe because of my very high utilization. (I only have 3000 in credit lines, and I'm at about 90% util.)

 

I also have a few issues on my reports that could, in theory, keep me from a mortgage once my score gets to 620+. (Old collections and such).

 

I am getting a bonus in the beginning of January and a large tax return in late Jan/early Feb. (I have a lot of educational credits as my wife and I are both students.) I need to pay off my cards and also a vehicle that is affecting my DTI. I also want to get moving ASAP, because our lease is up very soon.

 

Here is what I am thinking:
-Jan 1- pay off my cards w/ my bonus. Score (hopefully) goes over 620 when the cards report again a few weeks later.

-Feb 1- apply for mortgage. Be approved, but because of higher DTI, qualify for less.

-mid-Feb- pay off car. DTI goes to where it should be.

 

Can I then go back to the lender and say "now my DTI is 20%, let's bump up what you approved me for"? Or do I need to wait until my DTI is where it should be before applying?

Message 1 of 7
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Valued Contributor

Re: How should I time my application?


@Juniper117 wrote:

My score is not quite 620, I believe because of my very high utilization. (I only have 3000 in credit lines, and I'm at about 90% util.)

 

I also have a few issues on my reports that could, in theory, keep me from a mortgage once my score gets to 620+. (Old collections and such).

 

I am getting a bonus in the beginning of January and a large tax return in late Jan/early Feb. (I have a lot of educational credits as my wife and I are both students.) I need to pay off my cards and also a vehicle that is affecting my DTI. I also want to get moving ASAP, because our lease is up very soon.

 

Here is what I am thinking:
-Jan 1- pay off my cards w/ my bonus. Score (hopefully) goes over 620 when the cards report again a few weeks later.

-Feb 1- apply for mortgage. Be approved, but because of higher DTI, qualify for less.

-mid-Feb- pay off car. DTI goes to where it should be.

 

Can I then go back to the lender and say "now my DTI is 20%, let's bump up what you approved me for"? Or do I need to wait until my DTI is where it should be before applying?


What type of loan are you thinking about applying for?

 

Conventional? FHA? USDA? VA? etc etc etc

 

The reason is they all have different front and back end limits.......

Good Luck
May all your dreams and wishes become a reality!
Message 2 of 7
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Contributor

Re: How should I time my application?

Probably USDA, possibly FHA.

 

I currently have 2 car payments, which would make my DTI crazy. Right now, my monthly payments (SLs and cars) are $886. After I pay off the 2nd car, it will be $511.My monthly gross is 4333.

 

So, if I applied with both car payments reporting, could they approve me for a very modest mortgage and then I know I'm approve-able, start to shop in my real price range, and then have them change the amount I'm approved for the next month once the car is paid off?

I know this sounds silly, but really every day counts. We don't have much time on our lease and I can't do a month-to-month rental or anything. I have 2 small kids, need to decide on a school district before the next school year starts, etc. I need to hurry as quickly as possible.

Message 3 of 7
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Regular Contributor

Re: How should I time my application?

I suggest before pulling credit to see where you stand at get your debts paid first. Then start shopping. A hard pull will cause a slight decrease and if you pull again a month or two later it may hurt your score more. If you have a set time on when you are ready to start looking at houses then get things paid by then. Until then research on other things you can do to raise your score before applying. Check out the rebuilding forum to see what you can do to boost your score over minimal reqs.
Message 4 of 7
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Senior Contributor

Re: How should I time my application?

Will you be able to provide a down payment?

 

If you list out your debts, total amount and payment amount, we might be able to give you a better direction to go in.

 

Be careful not to purchase at the high end of your buying power.   Things happen.

Message 5 of 7
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Frequent Contributor

Re: How should I time my application?

I would advise to have all your ducks in a row for what you want to be pre-approved for.  Having to go back and forth and submit paperwork to the LO then the UW is a hassle.  If you can wait, I would do that.  In the long run, if you wait, your closing will go much smoother.

Message 6 of 7
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Moderator Emerita

Re: How should I time my application?

Paying off your debt is excellent when applying for a mortgage.

However applying on Feb 1 is too close to the pay off date. Some creditors report with a 30 day lag time (Jared's and Kay's are notorious for this). What I mean is that it actually can take up to 60 days for your zero balances to show for some of the creditors.

 

Do you have your lender selected yet? If not, find a good loan officer and get the criteria you need to qualify without the loan officer pulling your credit just yet. You need to know the ratios needed (as pointed out above) for each of the loan types you are considering. You also need to know how much your future payment will be on a given property. They can provide the general figures to you through a closing cost worksheet that is non-binding. You need this info in order to make a plan so your funds are put in the right place.

 

IME, it is best to pay off the debt to your cc's first. Then pay down or off the car loan. Let everything report. Make sure you have opted out before you start this process. Once you have opted out and your balances are paid off, then apply for a mortgage. This may mean you apply in March or April rather than Feburary. You want to be in the best possible position before you make application, not afterward.

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