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So if I take care of my jeep loan and my credit cards, will I be able to get a loan just on my income? $25k year, which im sure I will get a decent raise later this year bringing it to about $27k a year. But on the $25k a year with no debt and decent credit, what kind of loan am I looking at? Around this area, you can get a nice condo/semi, or if your lucky a nice single 1500-1700sq ft for around $100-$120k. Prices are dropping still and see nice places i would like for the $80-90k range. Some may need a few small repairs like drywal/paint. But I can do thatr myself
Thanks guys. My girlfriend had her forclosure put on her record about a year ago.
I have a total of about $1k credit card debt. I have 5 credit cards and used them just to try and get my credit higher, quicker, by paying everything on time and only use them a little bit and none are over 50% of the limits.
I agree too that paying off my jeep would give me about a extra $150 a month. Plus I can always lower my insurance from full coverage to liability so save another $35 a month.
Her daughter will be in 1st grade the end of the year, so thats full time school and daycare may not even be needed since I get done at 2:30pm and can pick her up right away from school.
My credit score is 650 right now, so would it go up if i pay off my jeep loan, and pay off all my credit cards?
My other option, is going back to school part-time nights or online classes (im only 30) so can still get a better education since i have high school only. Im really good with computers, so was thinking of going for IT, or computer repair, or something similar. say I do that for 2 years, and land a better job by 32. I can still put 30 years in that job if not more before im ready to retire. But thats a different story.
If you pay off your jeep, that account is going to close and that will drop your scores. If you pay down your cc balances to 30% of the limit that should give you a few points.
Take my advice and contact the local USDA office and ask about a no money down USDA Direct mortgage.
Have you talked to any lenders yet? They should be able to tell you what you'd qualify for. But I agree with the last post in that USDA could be the best option to get a loan with no down payment.
If you pay off one of your debts it HURTS your credit score?
Credit score calculations are pretty complex. One of the things they look at is credit age. That is, the average age of your accounts. If the jeep is an older account, and it closes, and all the other accounts are younger, it could slightly lower the score.
However, I don't know if cars and houses actually show as "closed accounts" in the score, since revolving debt and installment debt don't work the same way. I would guess that paying off a car would raise the score very slightly. Now, once the car loan drops off the report in 7 years, if they haven't built up other credit in the meantime, that could drop their score slightly if the car loan was always paid on time.
But in direct answer to your question, I believe it is possible to hurt your score by paying off a debt. If you have a very old collection that is about to fall off the report, and you pay it off, it could show as new activity and temporarily cause the score to drop. I've been told it isn't supposed to happen that way, but I believe it still does in some cases.
If you pay off your jeep, that account is going to close and that will drop your scores. If you pay down your cc balances to 30% of the limit that should give you a few points.
Regardless, keep the big picture in mind. Your goal is not to build your credit score, your goal is to build wealth. Don't make bad financial decisions because it will improve your credit score. Keeping a jeep loan with 16% interest around any longer than necessary to pay it off, is a bad financial move, even if your credit score goes down slightly as a result.
Debt to income & asset vs liability VS Credit Score...
Paying off a car loan will always result in a positive effect on your ability to borrow more money. It reduces your debt to income ratio. Further the removal of a financial liabilty (the loan on the vehicle) and the fact that cars are legitimate tangible assets for the purposes of lender qualification means that it makes sense to pay off such a loan as quickly as possible.
Most analysis of how such a transaction will efffect the models that credit bureaus use to create a credit score have shown that this is different than CLOSING a revolving line of credit (such as a charge card). Increasing your asset base is at worst NEUTRAL to most credit scores whereas closing a revolving account can raise your "total percentage of extended credit" MAY result in a lowered credit score...
Pay off the Jeep AND reduce your total CC balances!
Quote:
Originally Posted by nmb30
If you pay off your jeep, that account is going to close and that will drop your scores. If you pay down your cc balances to 30% of the limit that should give you a few points.
Take my advice and contact the local USDA office and ask about a no money down USDA Direct mortgage.
Paying off a car loan will always result in a positive effect on your ability to borrow more money. It reduces your debt to income ratio. Further the removal of a financial liabilty (the loan on the vehicle) and the fact that cars are legitimate tangible assets for the purposes of lender qualification means that it makes sense to pay off such a loan as quickly as possible.
Most analysis of how such a transaction will efffect the models that credit bureaus use to create a credit score have shown that this is different than CLOSING a revolving line of credit (such as a charge card). Increasing your asset base is at worst NEUTRAL to most credit scores whereas closing a revolving account can raise your "total percentage of extended credit" MAY result in a lowered credit score...
Pay off the Jeep AND reduce your total CC balances!
I get what you're saying and agree with it for the most part but the conversation centered on the OP raising his credit scores. I've had a client's score drop because of a paid off an auto loan so in the context of the conversation I stand by what I said originally.
Regardless, keep the big picture in mind. Your goal is not to build your credit score, your goal is to build wealth. Don't make bad financial decisions because it will improve your credit score. Keeping a jeep loan with 16% interest around any longer than necessary to pay it off, is a bad financial move, even if your credit score goes down slightly as a result.
THIS!!! To expand on the big picture thread, don't buy a house now just because you can get approved and want one. You seem to be focusing a lot on the "can I" and ignoring the "should I" part of the equation.
I will say it again. Besides the credit, debt and foreclosure issues, you also don't have enough in savings, and you are used to spending all your money every month (or you would have more in savings) meaning you don't have enough expendable money to put toward a mortgage and utilities and all the other things you aren't currently paying for. Give serious thought to my prior suggestion. Live for 6 months as if you had already bought the house, and save the money you don't spend as a result. That will fix both problems and tell you whether you can afford what you are wanting or not. If you can increase your savings to $8k in 6 months (the $2500 you already have + $1000/month in PITI + basic utilities estimated* = $8500), and pay off the credit cards and the car at the same time (there will always be something to either pay off or save for, either a dentist bill, or a new water heater, or a computer, something always), and feel like you can continue on that course indefinitely, then I would say you are ready to look at buying.
* Note that this is only a wild guess and probably a VERY low estimate. A mortgage calculator tells me that if you got a loan for $85k at 5% (guessing high because of credit), the PI payment would be around $450. Adding $200 for taxes and insurance, and figuring around $350 for utilities, by the time you have power, gas, sewer, water, and trash gets me to $1000/month. Add $100+ more if you are going to want cable/dish or internet. Add $50-100 more for homeowner's association dues for the condo or townhouse. Add $300+ more for groceries, which it looks like you aren't buying now. $1500/month may be a better number to shoot for, meaning you should then shoot for $11,500 in 6 months total.
If everything else is perfect, you can qualify on just your income. I make only slightly more than you (about $32k) and I bought my house sole and separate without my husband, as his credit wasn't great. I borrowed $108k (had the 20% down figured out already) and had a car loan in my name at the time, which I owed about $10k on still, with not much other credit (nothing bad, just not much, I got a couple of credit cards, charged and paid them off to boost my score, like you are doing), but that was back in 2003 when the lending criteria wasn't nearly as strict. So your income alone isn't a problem for what you are looking for, and your 6 years on the job will help.
I also had very little money in the bank, only a little bit more than you do. My down payment came from my parents, the same as you are looking at doing. I'm telling you, I've been where you are now. The difference was that I had been living in an apartment for 3 years with my husband already, so upgrading to the house only added about $300/month in mortgage/utilities to our budget and it was an easy transition to make. I can't imagine leaping right into paying $1500/month more than I currently do without more of a safety net than $2500. And having that $2500 assumes that someone else makes your entire down payment, or you get a 0% down loan, and that the seller pays your closing costs. Our mandatory spending every month is about $1800-$2000 (that isn't including any saving or investing). Our townhouse is about 1200 square feet, about what you are looking at, plus we have no kids and live very frugally, we hardly ever go out anywhere, so you can figure your monthly expenses will likely be higher than mine, or at least in that same ballpark. You currently are spending only $350 on committed spending, and haven't managed to save much at all. There is a mathematical problem there.
I think you could get a LOT closer to ready in 6 months, but I really don't think you are ready now.
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Debt to income & asset vs liability VS Credit Score...
