Home equity loan with good credit but hight debt ratio

You are actually closer than you think / it is all in the math. I would have 2 concerns: your credit / and your new debt to income ratio, as the new loan to value would ideally require the appraisal to come in more like $110,000-$120,000 to make this work. Ideally - if you have a 660 credit score => then you can do a cash-out up to 80% ( so $45k mortgage + $45k credit cards + $3k in closing = $93,000; then $93k divided by 80% = $116,250 for a required new value when the appraisal is done). $120k for value gives you a little more wiggle room. This then allows you to pay off those credit cards (and the credit cards will be closed too (unfortunately)). So then you are left with a new $93,000 mortgage + taxes + insurance divided by your gross monthly income. Once the appraisal comes in, and if you cannot pay off ALL of the $45,000 in credit card debts, then we don't pay off the lowest ratio card of the balance to the payment, and see if we can get you to clear the debt to income ratio % hurdle. If you have any family members that can pay OFF any of the credit cards for you? I'd also pursue that. Chin up!!!! Jeff Albrecht / JAlbrecht@PrimeLending.com / 512-381-4643

Hi vmakus and thanks for sharing your situation. Obviously your debt ratio is a bit of a roadblock at the moment. What type of mortgage are you currently in? Conventional, FHA, VA?

That is a heavy burden of debt but good job in keeping things in good standing. There aren't any traditional options available to take out an additional loan with that dti even with the equity you have in the property, and with the loan amount where it's at and what rates were last year, getting a lower rate on your current loan won't do anything. As far as working on a plan to take care of the credit card debt, I personally can't advise you in that matter, but I may have someone I can refer you to in that regards if you'd like to contact me on my profile.

A debt ratio of 88%? You'll never get a lender to give you a loan as it appears you have one foot over the financial grave, and another on a banana peel. You'll have to figure something else out to get out of your situation.

That is a heavy burden of debt but good job in keeping things in good standing. There aren't any traditional options available to take out an additional loan with that dti even with the equity you have in the property, and with the loan amount where it's at and what rates were last year, getting a lower rate on your current loan won't do anything. As far as working on a plan to take care of the credit card debt, I personally can't advise you in that matter, but I may have someone I can refer you to in that regards if you'd like to contact me on my profile.

That debt ratio is goingt o be a problem for any lender.

Unfortunately wit that high of a DTI it will be extremely hard if not impossible to find funding. You best option would be to remain current on all payments and pay down the debt before you will be able to take out an equity from your home. Good luck!

Others have talked about your debt ratio. I want to address your credit score issue.It is likely that the credit union pulled a FICO credit score which is the only accepted score source for mortgages. I suspect that you pulled a Vantage score from the credit bureaus. When you ordered a credit score if you DID NOT specify FICO you would get the bureaus' proprietary Vantage credit scores. Vantage scores are always significantly higher than FICO scores for the same risk level as they use a different scale. So, it is like comparing oranges and apples. They are both good fruits but they are hugely different.If the Vantage scores were used, which they aren't, it would likely require a 750 or more to equal a FICO 659. Most mortgage companies require a minimum 660 to refinance an FHA loan and some require a 690 for the best rates. You might find a company that will go down to 620 but you will have higher costs for the same rate, or a higher rate for the same costs, or higher costs and a higher rate.Check if your credit report says Fair Isaac Company, the acronym for FICO. Ask the credit union if you can have a copy of the credit report they pulled. Else, buy a copy of your credit report with FICO scores from one of the credit bureaus. Then review what is driving your scores this low. If there are errors in the report simply correcting those errors might get you up above 680. One other action is to increase your credit limit on existing credit accounts--if possible. This does not show up as new credit being opened--you already have an existing relationship with the credit card company. What it does is to decrease your use of credit as a percentage of your credit limit on that account. Smaller usage is better than larger usage, thus increasing your credit score.

Most lenders top end expense ratio usually does not exceed 60%. My suggestion is if you are a member a a credit union visit that option, they sometimes bend for their clients.

Jeff has it all together. You need a smart loan broker, one who knows how to figure debt ratio AFTER the loan closes. Some credit cards require a monthly payment of only one to two percent of the balance, so it may help to pay off only a portion of the balance. Also, you may need to wait until 12 months after purchase, in order to use the full appraisal value, not just the hard cash you put into repairs.