Seeking guidance from the gurus

[ujocka]

I am currently under contract for a new home with my wife. Our DTI is about 55%. My FICO mid is 710, wifes is 665. No baddies on mine, hers has a few late payments from two years ago. We are in the market for 100% financing via an 80/20 or whatever works and are including closing costs in the loan. I am in the process of reducing the DTI by selling a second vehicle that is financed and rolling over the negative equity into my other vehicle (Sell for $7000, negative equity of $5000) and consolidating my cc balances and personal loan I already have through citifinancial (highway robbery) with a new personal loan that will encompass it all. Doing this should reduce our DTI to about 48%.  I have listed pros and cons I have identified.

Pros:

-Eliminating my remaining cc balances (1 card @ 60% util , the other @ 70%, total util from all revolving accounts is 35%) should give my FICO a nice boost.

-Getting a new personal loan with a better interest rate (citifinancial 25%!!) should result in a lower payment than my current payments on cc's + citifinancial loan, therefore improving DTI.

-Selling the second vehicle will result in a $7000 reduction in installment loans.

Cons:

-New personal loan will cause FICO to drop.

-Vehicle refinance with negative equity from sold vehicle will result in FICO drop (new installment loan)

In conclusion :The FICO increase from the cc util reduction should outweigh the hit from 2 new installment loans shouldnt it?)

Good plan or bad?

[Anonymous]

it might but we are seeing people report drops after paying off car loans and getting new personal loans.

good luck

[ujocka]

Have any of them given the # of points they lost. While I understand I will take a hit on 2 new installment loans, and possibly another hit for paying off two installment loans off, I will still have an an existing installment loan of $30k on the remaining vehicle. I thought I read that the people that took the hit after paying off loans were those that had no other installment accounts. Any thoughts? Thanks in advance!

[Anonymous]

I can't tell without seeing the whole picture, but I think that you will not be punished for paying down. It is better to have small balances on all your TL's rather then max or at near max on one TL but others at 0. Installment account entails a different FICO dynamics....hard for anyone to predict the corret outcome. Stick around, maybe someone will be able to help you here over the weekend. Moderators are all gurus here. take their advice.

Good luck.

[Anonymous]

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ujocka wrote:

I am currently under contract for a new home with my wife.

---

I read your post, then on the second time through I stopped reading after this sentence.

Are you pre-approved on the loan, mutal consent on the offer, inspection done, appraisal done, closing date set?

If all yes, I would not make ANY financial moves (closing or opening anything) until after closing. When is it?

[ujocka]

A loan broker I used for a previous property prequaled us, but we have not submitted docs yet for the pre-approval. He did pull credit and said he doesnt see any problems based on the income I provided. He calculated our DTI based on the CR and commented that we needed to lower our DTI some to get more offers on the table. He also mentioned we needed to shoot for 680+ mid FICO for both of us. He did issue a commitment letter to the builder but we are not into a specific loan yet. The closing is Nov 29th. The DTI has lowered about 5% since his first CR pull (payed off all her cc and 70% of mine).

[Anonymous]

First, don't close ANY CCs.

Second, what are all your CC balances and limits--yours and hers.

[ujocka]

I dont plan on closing any cc's. Hers are all at 0% util (she is going to bring up total util to 2-3%). I have two cards with balances.

                                               Bal.   / Limit

USAA M/C -                           4055 / 6000

AAFES STAR CARD            5445 / 7000

HSBC/LEVITZ                            0 / 3500

HOME DEPOT                          0 / 4000

ORCHARD BANK                     0 / 1450

USAA AMEX                              0 / 1500

WAMU/ PROVIDIAN               22 / 2000 - AU on wifes account

PS- It is a jumbo loan ($500k) , so FHA / VA is out of the question

Message Edited by ujocka on 09-15-2007 04:08 AM

[Anonymous]

First thing I could do is call up Orchard, USAA (on the AMEX), and WAMU to ask about a CLI and APR reduction. Tell 'em you're buying a home, and any CLI would help out a lot. Take a look at my CC Tactics link in my sig. Try to get anything you can outta them.

You're at 53% util overall--excluding store CCs. $550 and some BTs will bring that down to 50%.

So is the 2nd car financed for $7K but worth only $5K?

I'd shop around for a local CU, stop in, and try to open a savings account and personal loan. Rates will likely be better.

[Anonymous]

My memory is that any loan payments on a loan that will pay off within a short period does not count towards DTI. So perhaps paying down to where it is still open but will be paid off in a few more payments will give you the best of both DTI and credit score. Check with your broker or lender as these things change over time and with different lenders.