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pilotmike327

Refinance to improve DTI?

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Possibility of applying for a mortgage towards the end of the year. Currently have auto loan with NFCU (who I plan on using for mortgage), 4.19% and about 30 months left. Payments are $360 with $10,250 payoff. However, I was pre-qualified for 4.02% with 44 month terms though Cap One, lowering my bill to about $250 and helping my DTI. I understand prequal is not the same as preapp. The cons I see with this would be an extra inquiry, longer terms and more interest over the life of the new loan, and possibly affecting relationship with NFCU when it comes time to apply for mortgage (since i'm taking my auto loan with them elsewhere). Thoughts?

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Is the car loan your only installment loan? If so, replacing it with a new loan - whose balance by nature will be 100% of the loan amount - could hurt your scores. So would a new account if your AAOA is low. Forget about the inquiry; no one cares.

 

Taking your auto finance business elsewhere won't impact your mortgage approval.

 

Do you absolutely have to shave $110 off your monthly debt obligations in order to get under the DTI threshold for approval? If so, consider buying less house.

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Is the car loan your only installment loan? If so, replacing it with a new loan - whose balance by nature will be 100% of the loan amount - could hurt your scores. So would a new account if your AAOA is low. Forget about the inquiry; no one cares.

 

Taking your auto finance business elsewhere won't impact your mortgage approval.

 

Do you absolutely have to shave $110 off your monthly debt obligations in order to get under the DTI threshold for approval? If so, consider buying less house.

Didn't account for the impact of the 100% loan amount and change in AAOA. Thanks for the extra perspective. Will keep current auto loan in place. Current DTI is acceptable for target mortgage amount but wanted to add a higher buffer to possibly get a lower mortgage interest rate.

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