I am considering getting a heloc to pay off about 40,000 in revolving debt (not counting two car payments). I currently have one of those mortgages that you can pay one of three ways every months (principle & interest, interest only & less than interest only). I decided I needed to pay down my debts so I started paying the less than interest only. Is this going to look bad for me? Also, when they figure my debt ratio, which amount will they look at? Does anybody know what the debt ratio is for approval of one of these. My scores are fairly low but only because of the high utilization. Any suggestions on where to look in southern calif?
Hi maer, it does look bad to pay less than intrest only or even intrest only. the best way to keep it up is to pay PI.high debt ration is debt to income which means what your bills are every month vs what is coming in. What you want to do is take a look at how much your house is worth and what your loan to value is on it. Heloc are strange thins because again they are intrest only so unless you make more then the monthly payment they bring your score down again. Plus you do have to have a fairly decent credit rating to even get approved for a heloc. high risk DTI is usually 55% but that is subprime. To get the best rates you want to be at 35%. But they would also be taking a look at DTI after the heloc. There are a few companies to look at but the best idea is to usually go with a company that you already do business with. if that fails there are the major 3 Wells fargo, wamu and Countrywide FSL. Good luck
So should I start paying the P&I payment for a few months first? I started paying the lower amount because I figured the interest rate was still much lower than what I was paying on the credit cards. My scores are around 630s and I have about 120,000 equity in my house. That would give me about 40,000 if I took out a heloc for 80% LTV. That should just about pay off those debts. My current mortgage is thru countrywide so I'm sure since I'm paying the lowest payment, they will take that as a high risk. I guess I'll look into the other two you mentioned.
