Hello All. I was just wondering what the mortgage experts on this board think would look better to a mortgage lender, 1. Save as much as possible for a down payment and pay only required payments on student loans. ------------OR----------------------- 2. Pay down student loands and have less for a down payment. I hope to buy a house within the next 1-2 years and am unsure of which option positions me better to obtain a mortgage. Any advice is much appreciated.
#1 most definately. The larger the downpayment that you have the easier it is to get a lender to accept your application for a mortgage. Ideally, you want to be able to put down at least 20% if possible, that creates a very large window of opportunity for you. You may also want to check with lenders in your area for a special type of loan that provides you with the best ROI and use of your money. It is called a CODI loan and currently is using a 3.5% start rate. With CODI loans DTI is not a major issue either and for example on a $100,000 loan your payments the first year is only about $135 every 2 weeks on a 30 year basis. This is opposed to a standard 30 fixed rate mortgage with a 7% rate the payments are 665.30 per month. Paying down your student loans, unless you completely pay them off, will not change your monthly payment terms. Extra payments, unless you specify otherwise, with many servicers only goes to future payments and not to paying down the principle. Also, the payment amount does not change on student loans unless you consolidate them. Hope this helps and good luck fla_tan
Forgot to mention, the payments described in my prior post do not include taxes and insurance. Nor do they include PMI. Which is not required if you put 20% down, but may be required if you put less down. Hope this helps. fla_tan
Save more for the downpayment. Plus, with the student loans, your rates shouldn't be much over 6 (if they are consolidate with William D Ford Direct Loans)... So the student loans have low interest, and part of it may be tax deductible. can't beat that. and if you have 20Percent fo the house, you can do a no doc loan and pretty much get it regardless of anything else.
Also, if your credit is not good (no idea how your credit is), then you will need to put more money down then an "A" credit person.
Marie Most of your post is very good, but the part about no doc loans can be very inaccurate. I am a mortgage loan officer and in order to get a true "no doc loan" a person needs to have at a minimum a middle score a 620 and most lenders will require the middle score to be over 660. In addition, the number of lenders that do "no docs" is probably less than 20-25 nationwide. Also, any Student Loan Consolidator will provide the same interest rate as WD Ford, and some of them have better programs as well. Also, the current rate on student loans will depend on when the loan was taken out. For loans originally taken out before July 1, 1998, the current rate is 6.79% and for loans taken out after that, the current rate is 5.99%. And that is the same no matter who you go with. Another thing,FWIW, it is almost a given that the interest rate on all Federal Student Loans both Direct and FFEL are going to be dropping effective July 1, 2002. So it would be to your benefit at this time to wait until then. In addition, if someone is in their "grace period" the rate is going to be even lower still. Good luck and good hunting fla_tan
