Fort Lauderdale, FL · Member since 2015 · 45 posts · 6 votes
Hello BP Community!
I will be making offers/bids for HUD and Fannie Mae homes soon. I would like some guidance in terms of how to approach applying for the loan.
I currently have 2 credit cards and 1 personal loan for a total of approximately 6k. I do not have any other debts.
I am selling my house so I expect to have enough money for the down payment and all other fees. However, I currently have some money saved and I do not know what should be my strategy.
Should I pay off the debts now and use the money from the selling to buy the new one?
Should I keep the money and use it to put a contract on the new home? And then pay off the debts?
I do not know if paying the debts is the right thing to do before applying for the new loan considering that I am trying to do both pretty much at the same time. Would those debts interfere with the approval? Or, is it so little money that paying them up-front would not really affect the qualification too much?
You should speak with a mortgage professional and get preapproved. Once we pull a clients credit and review their debt to income ratio, we can advise if paying off the credit cards would make any difference. I would be happy to help you if you are not already working with someone.
You should speak with a mortgage professional and get preapproved. Once we pull a clients credit and review their debt to income ratio, we can advise if paying off the credit cards would make any difference. I would be happy to help you if you are not already working with someone.
What is your DTI before and after paying off the 6k? If your DTI now is < 40% and the PITI from the HUD home you wish to buy doesn't get you too close to, or over that 40% you should be safe. Pre approval is easy and will give you a better idea of what the lender thinks.
@Yadira Gutierrez - have your loan officer run it both ways. There's no law saying we can't run credit, calculate ratios, collect paystubs, make assumptions about gross rent of new property, etc, before you formally "apply" for a mortgage.