Can we get denied for a 15 year mortgage but qualify for 20 year?

Question

getting ready to close on a home equity with Countywide they had me set up on a 30 year fixed buying 4 point because of our low credit score (553 my wife and 446 mine). I asked for a 15 year loan and they claim we cant get the loan because the loan is only under my wife name (cant have me on the loan because my score is too low to be on the loan so they dont count my income) and her "Net deposit income" is too low. I make 32k she make 23k best he can get is a fix 20 year loan @ 9.875 this any good or should i keep looking loan is for 50k refin old 25 k @ 14% and paying off other debt

$396 a month on the 25k @ 14% is the only other loan on the house that will be paid off with this new loan. I inherited the house with 13k in back taxes with no mortgage that what put me in the hole in the first place im learning the HARD way

o the first loan was on 10 year loan

Answer 1

What banks typically look for is total debt payments not equaling more than 40% of your income.

By extending it to 20 years, you can meet that standard.

Don't fret on the additional finance charges over the term. Just make sure you don't have a prepayment penalty.

What you do, is set up a bank account they can take your payments out of. Divide one month's payment by 4 and have them take that out weekly. What this does, is borrow 1/4 the money for the full month's term, and gets you an extra payment yearly.

On a 20 year mortgage, that can actually cut your time down to about . . . guess what . . . 14 years.

Now, while you are doing that, get your score up and the refinance so your name is on it. That will help your score go up too. Your score would go up if you just kept paying on the mortgage any way, even if your name isn't on the mortgage.

Good Luck.

Answer 2

You did not say what your wifes income was, but for them to go with the longer term is because her DTI (debit to income ratio was too high for the 15 year term). With her credit score that is not a bad rate. But I am slightly confused. Is this a home ewuity loan - or a refinance? What is your LTV (Loan to value/) Basiclly what was the home appraised at, vs how much you are borrowing will give you the LTV. The higher the LTV the higher the rate with a 553 score, but you should not have to pay 4 pts to get the rate.

Answer 3

It's entirely possible to be denied a 15-year mortgage but qualify for a 20-year mortgage, since the lower amortization will increase the monthly payment. If the payment increases on the 15-year mortgage, your debt-to-income ratio will increase and could disqualify you.

It's a little unclear, but I'm assuming you're keeping your 30-year 1st mortgage intact. It's hard to tell what your original payment was on $25K @ 14%, since you don't indicate the term, but your new loan will cost you $2000 out-of-pocket to pull out $23K at $480 per month. If your original loan was a 15-year loan (I assume this since you requested a new loan with the same term), then you're paying $150 more per month. If that $23K is all going to debt, then you're wiping out over $650 worth of monthly debt payments for $150 more per month. Your loan pays for itself in 3 months, assuming the original 1st remains unchanged.

Do you need to shop for a better deal?

Answer 4

I guess so.

Just remember, a 20 year loan means that at the end, you will have paid off almost an extra 20% above and beyond the 15 year term. THAT is why they are willing to give you the longer term.

Answer 5

They should work with you.