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<blockquote data-quote="DKS2814V" data-source="post: 15417849" data-attributes="member: 27079"><p>A lot of variables to consider when planning for a house, in my opinion. I am going through the same situation now...</p><p></p><p>What is the interest rate on your car loan? I agree with Torchd in that you'll need some liquid funds for closing, MX and overall upkeep, furniture, etc. However, in my opinion (albeit no financial guru), if the IRs are low enough on that loan, keep the loan and stay flexible with your liquid funds. For example, my loan on my F150 is 1.9% and I owe $3,500 left on it. This could easily be paid off, but in the event I need that money NOW (higher DP, emergencies, all the stuff I mentioned earlier), I want to have it. With that said, I paid off a credit card because I could which had something like a 10% interest rate.</p><p></p><p>All that being said, the way my mortgage broker discussed it with me is they are also looking at a debt/income ratio (in addition to your credit). Your debt should be between .37 and .40 of your income (or less, and it may vary in specific areas of the country). Take all your debts: car, credit card minimum monthly payment, and other fixed monthly debt/commitments and divide that by your income. If it's in that range, your mortgage broker could qualify you for a specific amount. If you're "living too close to the edge" with higher debts....your likelihood of a good mortgage with good rates is slim.</p><p></p><p>I am in the same position as you. If I pay off my truck, my debt-income ratio is wildly low ($670/month for the truck payment) and that looks better for me. Downside is $3,500 out of my pocket towards the house in some form or fashion. Additionally, I paid the CC off purely because of the IR, as the minimum monthly payment was trivial ($40/month) and would have unlikely done any "damage" to my debt/income ratio.</p><p></p><p>I'm in the Houston area as well, so if you want to chat with my broker (she's a good friend of mine), who works for Wells Fargo, let me know. She's helped me tremendously. There are quite a few things you can do to help, if this is your first time buying a home. She's hooked me up with a class to take that gets me 1/8% off the interest rate. Also advised based on a potential 1-time withdrawal from my Roth account (predicated it doesn't hurt my long-term retirement goals), that can go towards your downpayment/closing, etc. I think any mortgage broker should do this, but I'm not experienced enough to know what other kind of help they can provide.</p><p></p><p>...obviously a rookie in this realm, so I'm sure some others can correct me where I'm wrong and offer good advice as well.</p><p></p><p></p><p>I have utilized these sites in the past. I didn't know how much I qualified for and where those mortgage jokers were getting their information.</p><p><a href="http://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx" target="_blank">http://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx</a></p><p><a href="http://www.timevalue.com/products/tcalc-financial-calculators/mortgage-qualification-calculator.aspx" target="_blank">http://www.timevalue.com/products/tcalc-financial-calculators/mortgage-qualification-calculator.aspx</a></p></blockquote><p></p>
[QUOTE="DKS2814V, post: 15417849, member: 27079"] A lot of variables to consider when planning for a house, in my opinion. I am going through the same situation now... What is the interest rate on your car loan? I agree with Torchd in that you'll need some liquid funds for closing, MX and overall upkeep, furniture, etc. However, in my opinion (albeit no financial guru), if the IRs are low enough on that loan, keep the loan and stay flexible with your liquid funds. For example, my loan on my F150 is 1.9% and I owe $3,500 left on it. This could easily be paid off, but in the event I need that money NOW (higher DP, emergencies, all the stuff I mentioned earlier), I want to have it. With that said, I paid off a credit card because I could which had something like a 10% interest rate. All that being said, the way my mortgage broker discussed it with me is they are also looking at a debt/income ratio (in addition to your credit). Your debt should be between .37 and .40 of your income (or less, and it may vary in specific areas of the country). Take all your debts: car, credit card minimum monthly payment, and other fixed monthly debt/commitments and divide that by your income. If it's in that range, your mortgage broker could qualify you for a specific amount. If you're "living too close to the edge" with higher debts....your likelihood of a good mortgage with good rates is slim. I am in the same position as you. If I pay off my truck, my debt-income ratio is wildly low ($670/month for the truck payment) and that looks better for me. Downside is $3,500 out of my pocket towards the house in some form or fashion. Additionally, I paid the CC off purely because of the IR, as the minimum monthly payment was trivial ($40/month) and would have unlikely done any "damage" to my debt/income ratio. I'm in the Houston area as well, so if you want to chat with my broker (she's a good friend of mine), who works for Wells Fargo, let me know. She's helped me tremendously. There are quite a few things you can do to help, if this is your first time buying a home. She's hooked me up with a class to take that gets me 1/8% off the interest rate. Also advised based on a potential 1-time withdrawal from my Roth account (predicated it doesn't hurt my long-term retirement goals), that can go towards your downpayment/closing, etc. I think any mortgage broker should do this, but I'm not experienced enough to know what other kind of help they can provide. ...obviously a rookie in this realm, so I'm sure some others can correct me where I'm wrong and offer good advice as well. I have utilized these sites in the past. I didn't know how much I qualified for and where those mortgage jokers were getting their information. [url]http://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx[/url] [url]http://www.timevalue.com/products/tcalc-financial-calculators/mortgage-qualification-calculator.aspx[/url] [/QUOTE]
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