Posted by Anonymous on 2/6/06 9:40pm
Msg #94880

OT: Question for mortgage experts

I'm posting anonymous because my question may or may not be hypothetical and therefore may or may not contain personal info. :o)

Let's say that my spouse and I have a combined income of $100,000. However, thanks primarily to the start-up of spouse's business, combined with some unwise spending and unexpected emergencies, we have credit card debt of $50,000. Spouse has since gotten a full-time job and is doing the business on the side, and we've changed our spendy ways and created our own get-out-of-debt plan that we can easily manage in four years — three if we go extreme with beans and rice. However, we'd like to buy a house before four years time, but we can't do both debt reduction payments AND mortgage payments in our high-cost area.

Here's the question — is there a loan that would cover 100% of our, say, $350,000 house, plus an extra $50,000 for paying off credit cards?

Chances are, we'll stick to the original get-out-of-debt plan before buying (if this situation isn't hypothetical, that is), but I was just curious if such a thing exists. Thanks in advance for your insight.

Reply by Shane_OH on 2/6/06 10:09pm
Msg #94881

125% LTV loans are out there....

But they are super high risk, simply because the lender is lending you more than the value of the house. You'd be able to lend 437,000 on your home, assuming you'd qualify.

And here is where the tricky part comes in. You'll need to have a low DTI (Debt to Income Ratio) probably in area of 36-42% (some lenders go up to 50%).

to calculate your DTI, add up all of your outstanding monthly payments. Take the minimum monthly payment on credit cards, car loans, house payment, anything else that is on the credit report...but DO NOT include groceries, fuel, utilities as they typically aren't reported to the bureau.

Then, figure up your monthly gross figure. (take the amount on your W2's, or the Adjusted Gross income on your taxes NOT the amount on the 1099). Take that figure, and divide by 12. That is your monthly income.

Next, take your Debts divide by your Monthly income, and that is your DTI. If its over 50%, not much can help ya. If its closer to 36-42% you are golden, in that area.

Then you need to know your credit score. For a 125% loan, expect to need a 680 FICO or higher....probably 700-720 or above with some lenders.

And expect a higher interest rate as well....you won't find anything below 7%, probably like 8-10% or higher.

Like I said, they are risky loans.... but if you can get one, and it helps ya out....go for it. But remember, you won't be able to refinance until you get your principle at least down to 100% of the LTV.

Shane Teach
Loan Extraordinaire
Queller of riots
Certified Notary Signing Agent
All around nice guy

Reply by Anonymous on 2/7/06 12:43am
Msg #94884

Interesting; thanks!

We'd probably qualify by your criteria; monthly car loans, credit cards and personal loan minimum payments total about $2,000/mo. Our household monthly gross income is $9K and some change. My FICO is in the 740s. Not sure about spouse's; I need to check that. Not fond of the high interest rate part; then again, credit card rates aren't 5.5% either. Anyway, thanks for the useful info.

Reply by Shane_OH on 2/7/06 7:02am
Msg #94889

Re: Interesting; thanks!

I do what I can.... check around for some rates. I can ask a few broker buddies if you want an idea of what kind of rates you might get on a 125% loan. I was guestimating.