Waiting for short sale approval - time to clean up finances?
September 8, 2012 10:39 AM Subscribe
Already pre-approved for the amount I offered on a short sale. Is it okay to work on finances while I wait for short sale approval?
I received my pre-approval for the amount that I was hoping (from two separate companies), but my DTI was on the high side. One of the mortgage brokers also took into account part time and seasonal work that I didn't have 2 years history in, which makes me worried. The house is also assessed at more than twice my offer price (everything in this area is over assessed) and the taxes are expensive. The taxes weren't taken into consideration in one of my pre-approvals (even though I told the agent!) so that also makes me nervous.
Since I got the pre-approval, I've put in the offer on the short sale and now it is a waiting game to hear back from the lender. I know that I do have some time before I have to officially apply for the mortgage, so I thought in that time I can do things to make the application a lot smoother. (By the way, both mortgage companies went through a full documentation to give me pre-approval, they didn't just run the numbers). I know I don't want to do anything to screw up my credit, but what about making things better?
Using Zillow's "How Much House Can I Afford" calculator, I know I want to get my DTI down so that I can be confident that with the taxes, and only my annual salary taken into consideration, I'll get the mortgage at the price I'm looking for. I got pre-approved with a monthly debt of $780, and since then I've been able to knock $66 off (switching to graduated plan on my student loans - doesn't affect credit). I've got student loans ($291 per month), credit debt ($187 per month) and a car lease ($236). I'm looking to decrease my monthly debt by $39 more per month just so I can feel more secure that when I officially apply for the mortgage, no problems will come up.
I'm calling all my credit cards and asking for lower interest rates. So far, they are not very cooperative. What would happen if I went for a personal debt consolidation loan? Wells Fargo said that they would give me 8.25% interest, and a monthly payment of $124. I know that opening up a new line of credit is not good, but if it gets my DTI in a better place, would it be worth it? My FICO score is 691 (in the last year I did the student loan consolidation and leased a new car) so I'm not sure if I would send myself into a dangerous score. My financing is through a NJ program, Live Where You Work, which does allow for lower credit scores and higher DTI.
If the short sale takes 4 months to get approved, wouldn't it be worth it to have done the loan now and get my DTI down? Or will I just set myself up for a big mess?
Any other advice?
I received my pre-approval for the amount that I was hoping (from two separate companies), but my DTI was on the high side. One of the mortgage brokers also took into account part time and seasonal work that I didn't have 2 years history in, which makes me worried. The house is also assessed at more than twice my offer price (everything in this area is over assessed) and the taxes are expensive. The taxes weren't taken into consideration in one of my pre-approvals (even though I told the agent!) so that also makes me nervous.
Since I got the pre-approval, I've put in the offer on the short sale and now it is a waiting game to hear back from the lender. I know that I do have some time before I have to officially apply for the mortgage, so I thought in that time I can do things to make the application a lot smoother. (By the way, both mortgage companies went through a full documentation to give me pre-approval, they didn't just run the numbers). I know I don't want to do anything to screw up my credit, but what about making things better?
Using Zillow's "How Much House Can I Afford" calculator, I know I want to get my DTI down so that I can be confident that with the taxes, and only my annual salary taken into consideration, I'll get the mortgage at the price I'm looking for. I got pre-approved with a monthly debt of $780, and since then I've been able to knock $66 off (switching to graduated plan on my student loans - doesn't affect credit). I've got student loans ($291 per month), credit debt ($187 per month) and a car lease ($236). I'm looking to decrease my monthly debt by $39 more per month just so I can feel more secure that when I officially apply for the mortgage, no problems will come up.
I'm calling all my credit cards and asking for lower interest rates. So far, they are not very cooperative. What would happen if I went for a personal debt consolidation loan? Wells Fargo said that they would give me 8.25% interest, and a monthly payment of $124. I know that opening up a new line of credit is not good, but if it gets my DTI in a better place, would it be worth it? My FICO score is 691 (in the last year I did the student loan consolidation and leased a new car) so I'm not sure if I would send myself into a dangerous score. My financing is through a NJ program, Live Where You Work, which does allow for lower credit scores and higher DTI.
If the short sale takes 4 months to get approved, wouldn't it be worth it to have done the loan now and get my DTI down? Or will I just set myself up for a big mess?
Any other advice?
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Sounds like a bad idea to me. The last thing you want when applying for a mortgage is a brand new line of credit. $39/mo at 8.25% is, what, about $6000 in debt? Can you find another way to pay that down? Family loan? Someone who trusts you probably wouldn't mind a guaranteed 8% return. [I'm assuming you don't have another ~$12K to put down on the mortgage, which would also solve the problem.]
Also, $39/mo is probably not enough to derail a loan application. But don't quote me on that or anything.
posted by zvs at 9:22 PM on September 8, 2012