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What will put us in better Eye's of a Home Mortgage Lender?

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Barefoot
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What will put us in better Eye's of a Home Mortgage Lender?  Reply with quote  

So here is our situation...

Me- I just past the 2 year make of a Chp13 Banruptcy where I short sold my home. I only filed to save the house, so other than the Bankruptcy I have no other negative factors on my credit report.

Wife, credit score of 690 with our current home in her name with a single mortgage balance of 110,000$. And one car loan in the amount of 22,000$.

We combined bring in 6500$ Gross each month. Here is our quandary. I will be receiving a civil settlement within the next few months that will yield us 150,000 minimum(already in negotiations). Our Current house is worth 195-210k (as said above with a balance of 110k).

We plan on paying off the car, but not sure if we should pay the house off too. What is our goal? We want to buy another house within the next year that we can stay in for the next 20 years. So we are looking in the 350-450k range. After we pay the vehicle loan off, we will be debt free minus the home. IF we pay the him doff then we are 100% debt free.

So, should we pay the house off too? or do we look better to a lender with 100+k sitting in the bank? I have access to a VA loan, and we can always go convetional. We are just trying to figure out what would be the best route to secure a loan and look favorably to lenders.

Any help in the right direction is appreciated. And I apologize for the poor grammar, i'm tired- lol

Respectfully,
Barefoot
Post Wed Sep 03, 2014 5:54 am
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Wino
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Are you planning to buy an "additional house" or "a house to replace the one we have?" I recommend paying off the house in the latter, but keeping the money as a down payment for the former.
Post Wed Sep 03, 2014 1:43 pm
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littleroc02us
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I'm confused. So you short saled your home during the chapter 13 bankruptcy, but you bought a new home in your wife's name?
To answer you question about what I would do with a 150k settlement. I'd pay off your car loan for sure and your home mortgage. What lender wouldn't want to see a DTI level of virtually all income and no debt. My guess though is your going to have trouble getting a conventional loan anytime soon until 7 years have passed on the bankruptcy, so I'd wait for now until some time has passed.
Meanwhile pay off everything and with an income of 6k a month and no debt you'll be able to save 4k a month for 4 years until your ready to buy a home and you'll have 192k in cash for a down payment on a home.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Sep 03, 2014 1:46 pm
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Barefoot
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We plan on selling our current home, once we have moved into the new home. As far as the Chp 13 Banrkuptcy, I have spoken with the VA and they have already stated due to the short sell of the home and they recovered money for the loan I should be eligible for another purchase. I friend of mine went threw the same deal and was able to buy another home @ a 4.5% 30 yr/fixed within 2.5 years of filing for his bankruptcy. Maybe I forgot to mention, my 2 year window is Post chp 13 bankruptcy. I actually filed 5 years ago, it's been 2 years now since it ended.

So, seems most are saying pay the current mortgage off. Back to my original question, this will make us look better in a lenders eye's vs having 100k+ sitting in the bank? Thank you all for the responses.
Post Wed Sep 03, 2014 7:26 pm
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oldguy
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Right now, counting house#1 and car, your Net Worth is about $85,000, And after you get the $150k it will be $235,000 - ie, 3X more money to work with.

One thing to watch for - lottery winners, on average, are broke again in about 7 yrs. And they do what seems to make sense to them, ie they pay off their car, they buy a bigger house, they pay off the mortgage.

So you might want to consider using your $150k for wealth-building (instead of debt servicing). That amount ($150k) is a opportunity to become very wealthy, it would be a shame to waste it on 'stuff'.

Back to your question - your $235k NW is $235k to a lender no matter how you stack the money, ie you can put it in the bank, you can put it into house#1 equity, put it into the car - but when you add up the pieces it will still be $235k. What a lender won't want is for you to have both houses at once - even tho your plan is to sell house#1 immediately, he has no way of keeping you from turning it into a rental & keeping it - and he would worry about leaving you with $600,000 in real estate. You may need to move to an apt, sell #1, buy #2, and move again.

You didn't ask - but personally I would keep both the car loan & house loan - and use the $150k to build about $1,000,000 in about 15 yrs. And $2M about 7 years later (depending on your age).[/b]
Post Wed Sep 03, 2014 9:05 pm
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littleroc02us
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quote:
Originally posted by Barefoot


So, seems most are saying pay the current mortgage off. Back to my original question, this will make us look better in a lenders eye's vs having 100k+ sitting in the bank? Thank you all for the responses.


Again here is my response to that. Meanwhile pay off everything and with an income of 6k a month and no debt you'll be able to save 4k a month for 4 years until your ready to buy a home and you'll have 192k in cash for a down payment on a home.
What bank wouldn't love to loan you money for a house then.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Thu Sep 04, 2014 4:12 pm
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