Do lenders want more savings (not down payment) or less debt?

Question

I have a condo that is near completion and will begin to look for a mortgage in the next 4-5 months. I have a car note with about $10,000 left on it. Would a lender like to see that paid off and leave me with no monthly debt or have that $10,000 in the bank. I would not look to add to the down payment I have already made and have enough savings to cover the closing costs.
The only debt I have is my car note. Credit cards are paid off each month. 100K/year vs 380k mortgage. 650 FICO
THANKS

Answer 1

As long as you can afford the car payment and the mortgage payment, I recommend keeping the money in savings, or better yet a low risk investment account. In case of unexpected expenses, you need accessible funds.

Edit: Laissez-Faire ignored one thing about a car loan, it is not 'available credit'. If banks didn't care about having 'emergency funds' they would not ask about savings.

Answer 2

Lender wants to see #1 you have good payment habit, determined by, as you know, your credit report and credit score! #2 that your total monthly debt including your "proposed" mortgage (including insurance, taxes, flood ins, HOA dues,etc) and your car loan is not more than 36% (ideally, but its just a GUIDELINE, it's not written in stones!!) of your monthly income. So, in your case at $100K a year, is $8300 a month and 36% of that is $2900. My professional advice? No, dont pay anything off. Highest factor (in this complicated algorithm that determines Credit scores) is based on monthly payment. You can have a hundred credit cards with balance in each and every one of them and still maintain a 700-800 score! Your payment habit and high credit vs. current balance make the biggest difference in the determination. This might all comes as a surprise to you peeps, but minimum payment on your credit cards and keeping the credit balance at at least 30%-50% (but not lower than 30%) can increase your score...dramatically! If you took out a charge card with a $500 credit limit, charge it up to $250...keep it there and pay minimum payment on time for the next 3 months... I guarantee your score will go up 40 to 50 points! The higher your score the better the interest rates!

Answer 3

An important part of your credit score is the credit used to credit available ratio. The lower that ratio, the better for your score. If you can wipe out all your debt, that will help your score the most.

Your savings doesn't actually figure into the score.

Basically, the lender wants to see a good score and that your income is sufficient to make all your debt payments without too much of a stretch.

Answer 4

relies upon on your earnings. oftentimes, in case you could shop the vehicle notice and nonetheless be at 35% Debt to earnings or much less, then use it as a down. i'm guessing that isn't ever be the case nonetheless. additionally, there are a bunch of different components to contemplate. Why do no longer you talk this with the lenders as they start to tug your credit and look at courses and ask them which state of affairs could provide you the terrific obtainable own loan? sturdy success! Jay from Loanleaders. click on my avatar in case you ought to any extent further question. i'm sitting at my little own loan table on the instant. :)

Answer 5

Yes it is a combo of low debt no lates and the savings can be a factor in getting a mortgage.
You are on the right track and are doing everything right.

If you need any other loan info, e-mail me
Charles C
Loan Consultant
Higher Ground FInancial Services
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