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Installment Loans < 10 months including Car Leases

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Valued Member

Installment Loans < 10 months including Car Leases

Quick question:

 

I have paid a few extra payments on a few of my installment loans in order to have less than 10 months remaining.  If I remember correctly, the lender will not count those payments in my DTI calculation.  I know they did not in 2001, when I purchased my last house, but not sure if the rule still applies.

 

It is my understanding that is not true with a leased vehicle.  My lease expires in less than 10 months, however, I own a 2nd vehicle, outright.  I think I read that they have now started counting lease payments regardless if it will expire.  Is there a rule about counting lease payments if there is another vehicle?  My second vehicle is older, 2003.

 

I have secondary income that probably won't count (2nd adjunct teaching position only 1.5 years, military pension from spouse to start in November through a separation agreement).  The other teaching position is over 2 years, child support still has 6 years, and full-time employment over 8 years.  I also have over $200k in 401k, and $10k in stocks, all to be used for reserves.  And, $15k in cash ($10k given for relocation from my new fed employer).

 

I also have student loans payments: IBR (I am a federal employee: Student Loan Forgiveness Program requires you to sign up through one of the repayment plan).  Does Conventional Loan use the IBR payment or 1%?  Which type uses IBR payment as listed on my credit report?

 

I am reluctant to apply for this mortgage.  I feel I don't have all my ducks in a row yet.

 

Here are my scores:

 

FICO Score 8: EQ 784, EX 784, TU  767

Mortgage: EQ 759, EX 800, TU 760

Message 1 of 10
9 REPLIES 9
Moderator Emeritus

Re: Installment Loans < 10 months including Car Leases

With a mid score of 760 I'd suggest your ducks are darned close to in a row.  Also with that 401K you're doing way better than the majority of the population... quack quack yo!

 

I'll let someone else more experienced try to address the core of your question, but what is your income and and how much house are you trying to afford?




        
Message 2 of 10
Moderator Emerita

Re: Installment Loans < 10 months including Car Leases

One comment:  the "10-month rule" is lender specific.  Some lenders will allow the payment not to be counted in your DTI at ten months or less; others have an overlay for six months or less remaining on the installment loan and still others count the payment in your DTI up to the final payment. I know that Chase will count the payment in your DTI until it is paid in full, zero remaining payments. You have to ask the lender to whom you apply what their guidelines are for this issue. 

Message 3 of 10
Super Contributor

Re: Installment Loans < 10 months including Car Leases

(FHA)the old guideline was that the 10 payments left cannot be 'significant' (generally understood to be $100 or less)

 

new guideline says it cant be more than 5% of gross income. you also cannot pay it down to less than 10 months to qualify for this.

 

 

(fannie mae) less specific.... refer to the old rule above

 

Retired Lender
Message 4 of 10
Regular Contributor

Re: Installment Loans < 10 months including Car Leases

I was wondering the same thing, I have a lease that is scheduled for turn in next year May but I wanted to start home buying process in Jan and the payment would significantly reduce my dti if not included.

Current 3B scores Dec 2016: EQ: 794 TU: 785 EX: 755
Mortgage scores Dec 2016: EQ: 744 TU: 748 EX: 743
2017 Goal: reduce debt and purchase first home
Total credit lines: 112K
Message 5 of 10
Super Contributor

Re: Installment Loans < 10 months including Car Leases


@cd2004 wrote:

I was wondering the same thing, I have a lease that is scheduled for turn in next year May but I wanted to start home buying process in Jan and the payment would significantly reduce my dti if not included.


typically, when one turns in a lease. they get a new lease.

not the same as paying off a car.

 

uw will question what you will drive

 

 

Retired Lender
Message 6 of 10
Regular Contributor

Re: Installment Loans < 10 months including Car Leases

Thanks, so I will have to delay my home buying process because if a decide to purchase a new car then that would be a new account. 

Current 3B scores Dec 2016: EQ: 794 TU: 785 EX: 755
Mortgage scores Dec 2016: EQ: 744 TU: 748 EX: 743
2017 Goal: reduce debt and purchase first home
Total credit lines: 112K
Message 7 of 10
Valued Member

Re: Installment Loans < 10 months including Car Leases

I have another vehicle.  It is an older vehicle, Cadillac Escalade (2003), that I own outright.

 

I will ask NFCU what their policy is on this.

 

Thanks!

Message 8 of 10
Valued Member

Re: Installment Loans < 10 months including Car Leases

 I kn ow FHA is out.  I have too many issues going on.  Student Loans, lease payments, rental property, etc.  Not to mention I have less than 20% down and do not want to pay PMI.

 

I am thinking of going NFCU, but will shop around my loan.  If I remember correctly, if I get PMI, I must continue to pay PMI for 7 years.  Even if refinanced, is that correct?

 

Thanks!

Message 9 of 10
Valued Member

Re: Installment Loans < 10 months including Car Leases

$300k to $350k for the house

 

Annual Income: 

Full-time $100,000  (just took a $9k/yr pay cut when relocated Oct 1st)

Part-time (1) $12,000 (over 2 years)

CS: $9600 (over 3 years left)

Rental property: $1200 (I read only 70% counts toward income)

 

Less than 2 years:

Military Retirement from spouse :$12,000 (starts in November)

Part-time (2) $8,000 (in 2016, less than 2 years)

 

Lease: $875/ month  < 10 months remaining  <<<< do have another vehicle, but actually planning to purchase after lease expires

Student Loan: $850/month (IBR payment)   <<<< concerned about this at 1% of student loan balance.

Credit cards: $250/month

Care Credit Payment: $158/ month(no interest loan) <10 mths remaining

Mortgage: $1200/month (purchased in 2001), refinanced a few times.  Received as part of the separation agreement will refinance from VA Loan to my own name once I get my primary house.

 

I think the IBR payment is going to kill me.

 

Mortgage FICO:  759, 760, 800 (last I checked)

 

 

 

Message 10 of 10
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