Best Allocation of Funds

StartingOver10 · ‎05-25-2015

@Revelate wrote:
@StartingOver10 wrote:
Rev nailed it.
How much did your LO tell you to pay off (in monthly payments) to get to the loan amount you desire?

Reducing the maxed out cards will help with scoring, but your issue is DTI if you are looking to boost your loan amount
Question for you S10 as you know way better than on on this one; however, doesn't the DTI calc take into account what the interest rate of the loan is in the sense that the expected loan et al. payment has to fit under the DTI caps? Namely my hitting 720-739 on Fannie's sheet suggests my rate will be .125% lower than if I were in the 700-719 category based on my downpayment.

If it's feasible to eeek out the points on revolving utilization to get to a higher tier, doesn't this directly impact loan amount as a result?

Yes interest rate impacts the amount of mortgage the OP or you or anyone can pick up because the payment is lower. DTI really is a fixed figure - max mortgage amount and max back end ratio. You can manipulate the amount of mortgage by changing either the interest rate, the HOA or condo fees, tax payments etc. Or you could increase the score and reduce the rate - option 2 is a little bit more difficult. It is much more strightforward to knock off $X by paying off or paying down revolving debt. Easier for the u/w to see.

In the OPs case - since the loan is FHA and OP meets lender's criteria for mid-score he would be best served by paying off the debt that yields the highest reduction in his payments. Since he didn't provide those figures we can't really give him an idea of what would work best given his constraints of $2000 for debt repayment and his exisitng debt.

KeithW · ‎05-25-2015

Ideally it would be nice to sell our current house, which we have about $30K plus equity in, but moving the family in with relatives isn't too appealing.

EQ671 TU673 EX662

Anonymous · ‎05-25-2015

Pay off that 93% utilization card. Then start with the next highest utilization and pay that off down to the lowest. Once you get your mortgage then switch to paying from highest interest to lowest interest. Ideally get it paid off and don't run balances anymore, those interst payments are killing you.

StartingOver10 · ‎05-26-2015

@KeithW wrote:
Ideally it would be nice to sell our current house, which we have about $30K plus equity in, but moving the family in with relatives isn't too appealing.

You can sell your home first and then have seller possession worked out in the contract for sale for an extra 30 days (or even up to 60 days*) beyond your closing. This way you don't have to move in with the relatives. It is done on a regular basis - here we call it 'seller post closing possession' and it is a standard type addendum to the purchase and sale agreement. Normally you would pay rent for the term you have it beyond closing. Sometimes we can work out a free period, but that is an exception rather than the rule.

That $30k in equity will help you. More importantly the removal of the existing payment from your DTI will get you where you need to be on your new loan. If you can use some of the proceeds to pay down your existing debt you will get a better interest rate on a conventional loan.

Selling before buying is really the prudent thing to do and can be the best way long term.

*you can work out any term that is agreeable between the parties. 30 days is common. 60 days is the maximum allowed if your buyer has an FHA mortgage because their loan requires possession of the property within 60 days. Otherwise there is no constraint other than the buyer's desire to occupy the home for which they have paid