stacimarie Posted November 8, 2024 Share Posted November 8, 2024 Was a member here ages ago. I'm preparing for a home sale/purchase in 12-18 months. Hubs & I currently own our home: bought in 2006. Current value $300k-400k and we owe about $105k now. Zillow says $362k value, my mortgage company app says $386k. In the past 5 years we have replaced the roof, hvac system, water heater, windows. Rough ballpark I figure we could sell for minimum of $350k, net $200-210k after expenses and mortgage payoff. We are both on the mortgage and deed. These numbers are based on current details, and as I said I'm not looking to take action for another 12 months minimum. So I think these #s are reasonably conservative. When the time comes, I would like the next mortgage to be in my name only. Hubs is self employed with sporadic income while I work a salaried job (18+ years same employer). Credit scores for both of us are 700+ with nothing negative. He does have $30k+ in credit card debt he is working on. I am not joint or AU on anything of his w/ a balance. My credit cards are paid in full monthly, or currently 0% interest and will be paid off before any mortgage process starts. I do have a number of recently opened accounts in 2024 - but intend 0 inquiries and 0 new credit accounts over the next 12 months. I just refinanced my car loan to take it from a $504 payment to $390 payment (I pay more). I would pay it off with the current home sale proceeds but not sure if it would still be part of dti calculations? I am also on a car loan for my son in law at $630/mo. I have student loans - not sure what the monthly payment will be on them in a year. My salaried income for 2025 should be $73k and bonus of $35-40k. (From what I've read bonus will be counted in DTI as long as it has a 2+ year history of reliability. Bonus 2023 EOY was $35k, 2024 EOY anticipated at $40k.) My questions: should I be able to do financing on my own, without Hubs? And what is the holy grail of DTI? Some sites say 36%, others say 43%. I'm running #s and thinking $275k borrowed ($400k home with $125k down from current home sale) at 7% 30 year fixed would be roughly $2400 per month including taxes and insurance. I could make that fly under 36% DTI but it would require my car loan to be not included, make sure my cards + student loan be under $200/mo total. I am not big on the thought of paying off hubs credit card debt with equity $, but that is of course an option if his debts MUST be factored in. Feedback is appreciated. Quote Link to comment Share on other sites More sharing options...
Admin MarvBear Posted November 8, 2024 Admin Share Posted November 8, 2024 Welcome back to creditboards. Quote Link to comment Share on other sites More sharing options...
liverichly Posted November 8, 2024 Share Posted November 8, 2024 I ran the numbers and your income alone should be fine to execute your plan. I used your $73k/year salary and $35k/year of bonus income, used the new car payment along with your son's car payment, added $400/mo for misc. debt payments (student loans and credit cards) and the DTI is coming out to around 42.5% if you use a 7% interest rate. Anything up to 45% usually has no problem qualifying, assuming credit is solid, which 700+ scores are considered. Debt ratios all the way up to 50% can qualify for conventional financing if there are enough compensating factors (30% down & having plenty of money in the bank afterwards are both considered strong compensating factors). To answer your other question, the car loan payment isn't included in your DTI if it'll be paid off by the time you close on the mortgage. The only exception is a car lease, due to having to give the car back at the end of the lease and new transportation would immediately be needed. As far as your hubby's credit cards, if you don't pay them off with the equity after you sell, then what is the other plan to pay them off? What are the interest rates on the credit cards? If you don't use the sale proceeds to pay the cc debt off, then what else are you going to do with that money to make more money? Keep it in savings? Invest in stocks? I ask because having debt costs interest, so if you aren't going to eventually use the equity to pay them off then you should find a place to put that money so it makes more than the interest on the credit card debt. Otherwise paying off the credit card debt might make the most sense financially. Quote Link to comment Share on other sites More sharing options...
stacimarie Posted November 8, 2024 Author Share Posted November 8, 2024 Thanks for your response. It seems like we are on the right track. Hubs' cards are mostly at 0% at least for the foreseeable future. He has no financial obligations other than his credit cards. I have always been the 'breadwinner' and take full responsibility for the household obligations. Hubs has taken care of the house and the kids - who are no longer kids. The money he earns is for his hobbies, and unfortunately he allowed himself to go wild & crazy on spending on said hobbies over the past few years. We will probably set aside some funds from the home sale for us each to do as we wish, but not $30k. If we do so, and he decides to pay down his balances that is up to him. Some of the proceeds would pay off the loan we have on the window replacement. It is in Hubs name solely, taken out in 2019 at 5.95% interest. By this time next year it will be down to $13k remaining. Some for the actual move, and some to put in savings for the things eventually need to be handled around a house. I really want a 15 or 20 year loan, but figure the 30 year would be easier to qualify for based on DTI. But if we can get better rates w/ a shorter loan (instead of just paying an extra $300-500 every month) that would be good. I just turned 50. I do not plan to have a mortgage payment at 80. Quote Link to comment Share on other sites More sharing options...
liverichly Posted November 8, 2024 Share Posted November 8, 2024 Understood on his debt, he created it so he can deal with it. The excess funds from the sale of your home that aren't being brought in on the new home also count towards your reserves. The rates for shorter term loans aren't that much lower (usually about .125% for a 20-year and .250% to .375% for a 15-year) and even though you plan to pay it off much sooner than 30 years having the option to make a lower 30-year payment in any particular month in case it's ever needed could be helpful. Sounds like you'll be in a good position to move forward in just your name when the time comes. Quote Link to comment Share on other sites More sharing options...
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