Pay off auto loan before I apply for a mortgage?

[Anonymous]

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@Appleman wrote:

Yes, people can put down less than 20% on a mortgage. 20% keeps you from paying private mortgage insurance on a conventional loan.

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@Anonymous to also add to what @Appleman said, if you have access to NFCU, look at their mortgages.  With the exception of their FHA loan, all the others with zero down payment don't have PMI.

So look into them.

[CJIII29]

I dont know if I can save up the 20% and closing cost with my income.

[StartingOver10]

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@CJIII29 wrote:

I dont know if I can save up the 20% and closing cost with my income.

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This is why there are many loans offered for less than 20% downpayment. Not everyone can put down 20% to purchase a home. There is nothing wrong with paying PMI or MIP.  It is just another factor that impacts your monthly payment so you want to take into account how much you can afford or want to pay including the MI payment. 

There are loans available without mortgage insurance, but the interest rate is increased for the life of the loan. If it makes more sense for you to pay a higher interest rate than to pay mortgage insurance, then that is the type of program you will want to seek out. The qualifications for those programs may be slightly different. 

Whichever program you select, make sure it is one with which you are comfortable.

[CJIII29]

So there is no need to pay off the truck? before I try for a mortgage?

[StartingOver10]

We don't know enough about your income and debt. Is the $651 you get a net or gross amount? This makes a huge difference

Is it income from employment or something else like disability income?  This also makes a difference as non-taxed income is grossed up.

Is the truck payment your only debt?

[CJIII29]

I have the truck payment and a few credit card bills I paying off The $651 is net amount, I gross $973 every two weeks.

[StartingOver10]

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@CJIII29 wrote:

I have the truck payment and a few credit card bills I paying off The $651 is net amount, I gross $973 every two weeks.

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Big difference.  The lender uses your gross to make the calculations.  So your gross monthly income (annualized and then divided by 12) is approx $2106.16

If you are going FHA the max back end ratio is 56.99% but some lenders will only go up to 50% - check with your individual lender.  So your max, max debt including the new house payment would be $1200.30 

So if  you only have the car loan and no other debt then the maximum mortgage loan payment (including PITI and mortgage insurance and HOA if applicable) would be $955.30 (if your lender does allow the max backend of 56.99%)

You may even want to have a lower payment than that. I don't know your taxes, insurance and HOA (if applicable) but those amounts come out of the $955.30 and what remains is the monthly max P&I you can have and still qualify.

This is an excellent question ^^^ to ask your LO,

Banks are more conservative (tighter ratios) than regular mortgage lenders. 

[CJIII29]

They take out $293 out of my check for taxes, retirement, and health insurance.

[StartingOver10]

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@CJIII29 wrote:

They take out $293 out of my check for taxes, retirement, and health insurance.

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You may want to speak to your HR department to see if you can get that amount reduced.

The taxes I was referring to in my last post to you are property taxes for the home you purchase.  

[CJIII29]

Ok I will check!