When applying for a home equity loan to pay off debt is debt to income ratio a factor even though we are going to use the loan to pay off that debt?
2007-04-30 13:49:07 · 4 answers · asked by christina c 2 in Business & Finance ➔ Personal Finance
Yes, the minimum monthly payments on all of your debt is used in calculating both your debt to income ratio and your credit score. If you tell your loan officer that you intend to pay off the debt with the equity loan, they may be able to take those payments out of your debt to income ratio, but they can't take them out of your credit score, so the rate on your loan may still end up being higher.
If they do take the payments out of your debt to income ratio, they may require that the loans you identify be paid off from funds at closing, rather than giving you the money and allowing you to pay them off.
Paying other debts with equity from your house can be dangerous if you haven't resolved the issues that caused the debt, as you are more likely to run debt up again, and then you won't have the equity in your home to draw upon again. You should not use your house as a 4-sided credit card.
2007-04-30 16:17:13 · answer #1 · answered by aj485 5 · 0⤊ 0⤋
Write up financial plan and include your budget before and after the consolidation loan you are looking to get.
Show the steps you are going to take to eliminate the other debt (including cutting up excess credit cards and closing other revolving debt).
The sad thing is that you can get all the loans you need when you don't need them. Then when you need them, the numbers can work against you.
Make sure you get any credit score issues resolved before you go for the loan. Do some searches for best answers on that subject; there are a lot of good answers already posted.
Good Luck!
2007-04-30 16:19:08 · answer #2 · answered by JJ 5 · 0⤊ 0⤋
Hello my name is Joe Flores I'm with Elite Lending Services, a whole sale lender. One of the reasons I don't recommend getting a home equity line is because they are 1 point above prime rate and there an adjustable rate which is forecasted to go up another pt this quarter, Of course your closing costs will be lower through a home equity but you lose the security of a fixed rate. Allow me the opportunity to see if we can find you a clear benefit in refinancing. Give me a call anytime or email me.
Elite Lending Services
Joe Flores
561-305-2327
2007-04-30 21:18:42 · answer #3 · answered by Phillip L 2 · 0⤊ 0⤋
Ratio is used. Let it be known that is purpose of loan. It will become condition of loan approval.
2007-04-30 15:00:45 · answer #4 · answered by pumpdatiron 6 · 0⤊ 0⤋