Lowering dti for larger home, or larger down payment

[Anonymous]

We decided on not renovating and buying a newer home to accommodate our family of 5. We can sell our home and profit between $55-70k. With our current debt of:
2018 Camaro- $52,000 left $799 payment
Escalade- $17,300 left $279 payment
Wells Fargo Home CC: $5500- $229 payment(a/c and furnace)
Cu Credit Card: $3000- $75 payment
NFCU LOC- $15,000- $300 payment (had to do repairs to sell).
We have two options: pay off Wells Fargo, CU Credit Card, and $10k on NFCU which will give us about $47k down, but we would only qualify for a $230k home. With $1080 in car payments, $100 NFCU
2nd option: pay off Wells Fargo $5500, pay off CU credit card $3000, pay off $10,000 of NFCU, Pay off $41,000 Camaro (our CU will adjust the payment once with a large payment), and have $8000 to put down for a 3% FHA loan on $260,000 home. Leaving us with $167 Camaro payment, $279 Escalade payment, and $100 NFCU payment.
We will of course pay NFCU off this year.
I am leaning towards our second option, because we will be down to 9%dti coming into a new mortgage app, making $6333 a month. Both scores over 740 currently. Thanks for any imput!

[NC_Mtg_Loaner]

I believe you should definitely pay off the WELLS FARGO CC ($5000) and NFCU ($15,000) upon the sale of your home and therefore not even include that $20k as part of your ($55-70k)  "profit" from the sale of your current home becuase  the TAX MAN won't look at it that way.  (Although I am not a tax professional but you should consult one)  There's likely nothing worse than paying debt on an old home that you no longer own...although I am sure that some of the kids with student loans will likely be ready to chime in, but my point is to pay off all debt related to the house you sell.

So then if I assume this is done and you net $35k-$50k then go ahead and refinance that 2018 Camaro with another $10,000- $15,000 down which if my math is correct leaves you with $20-35k for your new house?   

This way, you can avoid PMInfinity with FHA, but you will truly like the conventional loan with at least 5% down payment (Ideally 10% if you have enough left over or can work that out) after you pay down that Camaro if you are planning on using all that cash.   Then, take a look at the 20 or 25 year loan amortization terms to see if those fit in your monthly budget and enjoy life for 3-5 years while you work that LTV down to 78% to rid the PMI and grow some equity.

[Anonymous]

Thank you for your imput. We would absolutely not carry any debt over from this house. I prefer to be debt free other than home and cars. Luckily our CU wont make us refi, they just adjust your monthly payment after a large lump sum is put down on the loan. They only do this once for the life of the loan. We definitely dont want a hard inquiry before an app. My only thought process is about paying the Camaro down to only $10k leaving us with about $8k as a down payment is the monthly payment we can afford on a new home could be higher, and we dont want to be house/car poor. $450 in car payments with a $1500 mortgage seems better than a $1400 mortgage and $700 in car payments. We plan on using our tax refunds after this year to apply directly towards the homes principal. My husbands main concern with getting a more expensive home and not paying off or lowering the Camaro payment tremendously, is that if his truck breaks down or an expensive item is needed we wont have the extra cash each month to pay for it. I appreciate all input. I just want to make the best financial decision, and I have gotten great help here.

[NC_Mtg_Loaner]

Paying extra money to your mortgage principal is nice ONLY when you are maxing out all other investment vehicles and options.

Do you and your hubby have any money saved for retirement yet?  

Have a look at the rate of return you've received in those investments for the last 12 months (or 3years even) and tell me if it's wiser to put more money in retirement funds generating an ROR > 12% or to pay off a home loan that you can defer paying at a rate of 4.0%?

With FHA loan, your payment will always be the same because you will have PMI forever.   A 5 % conventional loan's PMI will eventually drop off the loan allowing you to save more money down the road and I'm only stating this so that you won't overlook that fact.    Therefore, I'd be reluctant to pay off too much on the camaro so that you HAVE to go with FHA.

(FHA is a good loan program, but UFMIP on a $260k home is $4550 which you wouldn't pay on a conventional loan while the $2000 per year would eventually drop off once you have sufficient equity at 78% LTV for a conventional loan while you'll pay monthly PMI forever with your FHA loan) 

[Anonymous]

Thank you. I didnt think about all that. I was not thinking long term like that. Good food for thought

[Anonymous]

I believe with the second option you will qualify for more than $260,000, I think it will be $325k.

Also, I believe your NFCULOC would be around $58 a month (14% APR, $1.91 a day) for $5k, of course depending on your rate.

Also, you say your NFCU LOC is $300 a month, that is just over 25% APR, which I kind of doubt it is, so your payment should be closer to $180-200

[CreditInspired]

Just my 2 cents.

NFCU offers mortgages with 0% down with no PMI (this is not a typo!). You could also do a 3/5 or 5/5 ARM for lower monthly payments in the beginning and there is also the possibility of refinancing if the rates go too high once the interest rate resets if it's higher. And you can also buy discount points to buy the interest rate down.

Go to their mortgage rate page and play with the numbers. It offers all kinds of terms.

GL2U

[Anonymous]

I am using my NFCU LOC right now with $7.2k on it. The payment is $147. Its at 16.99% I believe. Its $100 for every $5,000. I know we could qualify for more than $260k, but we really dont want to go over that monthly payment. I believe with no debt other than my Escalade of $279 we could qualify for $389k I believe, and with $450 in car payments and $100 LOC it was $311k.

[Anonymous]

I will check out their Mortgages. They hadnt crossed my mind. I know my husband wont go for an arm loan at all. I've also considered USDA as we have one now with 0% down. However, finding what we want within this small area is hard. There were a couple houses I liked, but they are 2 miles outside of the USDA zone and dont qualify. Thanks for the idea of NFCU!

[Anonymous]

16.99% is $0.465 cents a day per $1,000.

$5,000 for 30 days is $68.82 a month.

16.99 / 365 = 0.04654795, turn that into a percentage, 0.00046548 X $5,000 = $2.327 a day, X 30 = $68.82

EDIT: I just realized I am talking Interest, not their minimum payment.

Sorry for my mixup.

Per NFCU on OLOC

**Repayment terms of 2% of outstanding balance or $20, whichever is greater.

So $5,000 is $100