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Need advice from the pros: I'm a year-ish out from purchasing a house. July will be my 2 year mark at work and my apt lease is up in Sept. Currently have 85k in the bank and should have about 95k at that time for down payment or remodeling etc. Credit is at 730 currently and will only get better. I have a high car payment that the lease ends next Sept which will help my DTI ratio when it's gone. I could renew my apt lease for 6 months while searching for house as I won't get penalized for breaking it due to purchasing a house with proof.
Also, I'll have the opportunity to get out of my lease early but I know it's not good to get new credit before getting a house. Does it matter if I'm lowering my payment by at least $350 a month getting that new credit or does it still hurt because I'm getting new credit?
What advice would you give me for a first time homebuyer to get all my ducks in order at the proper timeline to be 100% ready to go? TIA
Sounds like you've already got many of your ducks in a row.
Talk to a realtor and sign up for an email search of everything in the areas you might consider, not because you want to look at anything now, but so you can start to get a really good feel for what you can get for the money you want to spend, and in what area.
Less than 400k. I don't need a huge house as it's just two of us and I already know what area I'd like to be in. I just don't know if its too early to start getting on any email lists yet..
Well you are going to need a car, I assume, so you will not be able to avoid financing something. It isn't the new line of credit that hurts as much as the DTI. If you are lowering it by getting a new car, then it will actually help you instead of hinder you. I would do it as soon as you are able to do so. (Mainly because saving $350 a month is huge- that is my whole car payment )
When I purchased my first home, my SUV lease was going to be up soon but I had moved across the country, plus went from a very short commute to a very long commute, and I was out of miles. I was driving over 100 a day, so obviously this was going to get costly. I had to buy my lease out early and purchase a car. My payment went from about $280 to $340, but it did not have any impact in my home purchase.
Does it matter if I'm lowering my payment by at least $350 a month getting that new credit or does it still hurt because I'm getting new credit?
I am not real clear on what you are asking. Scores are based on capacity utilization, so more details are required. Once I have a clearer picture, it will be easier to advise you. What would you be paying off? (Do not close any revolving accounts)!
I am not real clear on what you are asking. Scores are based on capacity utilization, so more details are required. Once I have a clearer picture, it will be easier to advise you. What would you be paying off? (Do not close any revolving accounts)!
My car lease is up in Sept 2018. My pymt is $650. I can get out of it earlier by three months by going into another Lexus or trading it into another car line. It will be reduced either way. I just don't know if I should make a big "purchase" before purchasing a house or should I do that after purchasing a house.
Your credit score is in the high end of "good" but not "excellent" which is 740 and up. Leads me to ask if there are any negatives on your credit reports.
Since you are a year out from home buying I suggest you start by going to www.annualcreditreport.com where you can get your credit reports free once a year. You can pull all three now if you like or pull one now and a different one every three months to see if anything changes.
I also suggest you get one of those credit cards (Discover, BofA, Chase, etc) that provide your credit scores for free.
As I noted in the other thread, whether the car payment is an issue depends on your take home pay.
A $400,000 loan could easily result in a monthly payment (PITI) of $2500 and up depending on the interest rate. If your take home pay is $5000 and up and you have no other debts except the car, I don't think it will make any difference.
Apples and oranges. The other thread was about someone paying off a car, which would remove it from their debt to income ratio. OP is in a lease. OP will need a car to replace the leased car, so OP will still have a car payment in their DTI.
My car lease is up in Sept 2018. My pymt is $650. I can get out of it earlier by three months by going into another Lexus or trading it into another car line. It will be reduced either way. I just don't know if I should make a big "purchase" before purchasing a house or should I do that after purchasing a house.
Or do banks understand that you need a car...
Quote:
Originally Posted by jaynarie
Well you are going to need a car, I assume, so you will not be able to avoid financing something. It isn't the new line of credit that hurts as much as the DTI. If you are lowering it by getting a new car, then it will actually help you instead of hinder you. I would do it as soon as you are able to do so. (Mainly because saving $350 a month is huge- that is my whole car payment )
To clarify, because apparently I wasn't.
When they tell you not to go out and buy anything, they don't want you increasing your debt to income ratio (DTI). Opening a new credit card is a minor hit to a credit report, barely noticeable. Opening a new credit card and charging $10K will kill a person's DTI. The DTI is what would kill a potential loan. Opening a new line of credit without accumulating new debt should not prevent someone from getting a loan. If it does, you were barely qualifying to begin with, so you probably should wait to buy a home anyway.
If you did not have a car payment at all, going out and buying a new car would be the dumbest thing you could do since it would drastically change your DTI. But since you have a $650 car payment, buying/leasing a new car with a lower payment will actually HELP you, not hurt you. The new line of credit is barely a blip. A couple of points.
^^That's part of the equation I wasn't sure about. Yes-it will be a new line of credit but a lot less pymt so I think it should "balance" out.
I had a BK discharge in 3/09 and nothing ever since then. That's why my credit is at 720 but rising with my hard work. I've had two high car pymts since then (both Lexus) and never a late pymt so that is also helping my credit as well.
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