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Go Blue 99 · 08-22-2007, 04:07 PM

My wife received a car from her parents as a wedding gift. The car is in her name but they make all the payments. We are planning on buying a house later this year, and I'm worried that lenders will consider the car payment as part of our debt. The payment is quite high and would greatly impact how much we qualify for. Is there anything we can do so that the loan is not counted as our debt? e.g. a letter from her parents, paid statements from her parents, etc?

I appreciate any insight.

DavidS827 · 08-22-2007, 04:24 PM

A few months ago you could have gotten away with a letter from her parents and 12 months of cancelled checks. However, that is no longer the case and the payment will be counted against you no matter what. However, you do have an option that may be worth looking in to. You could refinance the car and take out a substantially longer term to lower your payment (just have her parents continue to make the same payment they make today). I can't tell you whether it will hurt your credit score or not, but it could help you get into the home you want.

Debsi · 08-22-2007, 04:24 PM

If the loan is in her name, then you will need to show proof her parents pay it.

This can be done by providing copies of the canceled checks, or 12 months of bank statements showing the payment being debited from their account. (plus a copy of the car contract to verify the payment amount)

UseJeff · 08-22-2007, 04:26 PM

You need to get all of the canceled checks from the parents making the payment. This will completely remove the debt from your debt to income ratio, but it will still help your credit. It's quite common and we do it a lot...although it's typically with someone's business paying for their lease.

Knowing you're buying a house long before you actually buy it is a huge advantage. Have you checked your credit to be sure it's all accurate? Have you spoken to a local loan officer, or one in the area you plan to buy? There may be things you want to tweak or adjust right now, which could really improve your ability to borrow, and could really improve the rate you get.

If you have not already done so... find an experienced loan officer and talk to them. They should be able to get all of your information and start the loan process in a sense. You won't be committed at all, but you will have an idea of what can be improved.

Good luck with the new house!

UseJeff · 08-22-2007, 04:28 PM

Quote:

Originally Posted by DavidS827

A few months ago you could have gotten away with a letter from her parents and 12 months of cancelled checks. However, that is no longer the case and the payment will be counted against you no matter what. However, you do have an option that may be worth looking in to. You could refinance the car and take out a substantially longer term to lower your payment (just have her parents continue to make the same payment they make today). I can't tell you whether it will hurt your credit score or not, but it could help you get into the home you want.

There are still plenty of lenders out there who will allow you to prove someone else is paying the debt. Even if it's in your name, you're still held accountable, so it's still a valid tradeline. In the end, it's the borrower's responsibility to ensure the payment is made. Even Fannie loans still allow you to prove payments are being made from another source, and remove it from your DTI.

DavidS827 · 08-22-2007, 04:38 PM

Not any more...I'm a recent Fannie Mae undwriting trainer and still talk to friends there frequently. DU/LP is still going to pick it up and underwriters just aren't willing to sign off on it any longer. And if the file gets u/w'd by an MI contract, then there is no way a contract uw is going to let it go.

UseJeff · 08-22-2007, 04:40 PM

Quote:

Originally Posted by DavidS827

Not any more...I'm a recent Fannie Mae undwriting trainer and still talk to friends there frequently. DU/LP is still going to pick it up and underwriters just aren't willing to sign off on it any longer. And if the file gets u/w'd by an MI contract, then there is no way a contract uw is going to let it go.

Is this within the last few weeks then? If this is truly the case, the initial poster definitely needs to talk to a loan officer. If this car is going to kill the loan because of debt ratio, the parents may need to refinance it into their name.

I sure hope the lending industry can come up with more crap to make our job harder!!!! bleh...

DavidS827 · 08-22-2007, 05:17 PM

Unfortunately it has happened within the last few weeks. The problem is that the secondary market that was allowing this stuff has almost completely dried up and even the variances that still allow this aren't being used by the lenders. What we're seeing is a return to pre, year 2000 underwriting standards. Something that will put (and already have put) quite a few newbies to the lending world out of business.

DavidS827 · 08-22-2007, 05:23 PM

...by the way, if you do happen to run across a lender that is still letting this go (and probably "portfolioing" the loan), please let me know. That sort of info is always useful!!!

UseJeff · 08-22-2007, 05:27 PM

I have/had a list of tons of lenders who would let that go. Granted my last office was closed by corporate, and now I'm just a loan officer for a few more months until the new company gives me my office... so with that said, I don't look at 60+ files a month anymore... With the Sub-prime crap going on, they very well could have removed that as well. It's still so logical, that I can't see why a lender wouldn't allow you to do it. Like I said, 90% of the time it was a company car in the clients name, but the company paid for it. Only makes sense to allow it to be removed from the DTI.