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 The Famous Hot Wing Chicken Girl
Posts: 2964
   
| I have a dilemma.
I'm selling my truck and getting a newer one since I'm having issues with mine (fixing the issues before selling, of course). My SO and I are also trying to buy a house since we are getting married in a few months, and we are in the process of getting approved for a USDA loan because we don't have a big enough down payment. I also have $16000 in student loans that are due. The interest for $13000 of that student loan is 6.8%, the other part of the loan has 3.4%. My student loan payment is around $120 a month, however that increases by $100 every year for the next couple of years, but will never exceed $360.
Do I use the money I sell my truck off ($20000 rough estimate) to : pay off my student loans in full (or pay the part with the most interest), save the money for a down payment on a house, or put the money down on a new truck (dealership says we can get an interest rate as low as 3.9% with our credit.)
By my calculations, if I was to pay off my student loans with it and use the remaining as a down payment on the truck I'm looking at, I'm going to have a payment that is about equal to, my current truck payment and student loan combined.
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  Damn Yankee
Posts: 12390
Location: Somewhere between raising hell and Amazing Grace | If it were me, I would pay of as much as possible. Even if it means your payment will still be about the same, I would rather be paying that to one debt then to several debts. And if for any reason you get in a bind, you have less debtors to worry about. I know with several of my vehicles I purchased over the years I was also able to have protection on the loan where if something happened to me, I could defer payments for a small amount of time. I've never had to use it, but it was nice to have it. |
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Sideways Riding Expert
Posts: 11371
Location: ND--it snows, it floods, it snows, it floods | My only concern is to make sure your house loan is said and done before doing anything else with big purchases. That is the one thing you do not want to mess up. |
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Damn Yankee
Posts: 12390
Location: Somewhere between raising hell and Amazing Grace | docschic - 2014-05-11 10:32 AM My only concern is to make sure your house loan is said and done before doing anything else with big purchases. That is the one thing you do not want to mess up.
That is a VERY good point!! And don't think your preapproval is set in stone! It is best to NOT get new loans until AFTER the closing date. Banks will run your credit and everything again right before closing. |
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 Expert
Posts: 1440
Location: Texas | Not sure where you are in the house buying process but if you have been pre approved and have a contract on a house DO NOT do any of the above. Wait until you close on your house Changes in credit can really mess things up. If you are still 6 months or more off of buying and aPplying for a mortgage the. I guess pay off the most that you can. |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| My SO is having to build his credit a little more before we can get preapproved. He has excellent credit, but only one line of it, whereas I have more lines and it's not as high as his. The guy at the benk who is helping us with the loan stuff told us to get him a secured credit card and establish a good credit history with them, then we could go through with getting a loan 45 days after that. He hasn't received his card in the mail yet so we haven't started doing that.
We really don't have an option when it comes to getting another vehicle. The transmission and torque converter went out in my SO's truck and now mine is broke down. We have the transmission fixed but the torque converter has to be sent off to Florida, and we have no idea how long that could take. We have to start getting hay up and we don't have anything that can haul a trailer at the moment.
Edited by cowgirlchic 2014-05-11 11:05 AM
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 Dog Resuce Agent
Posts: 3459
Location: southeast Texas | If you just need a truck for hay, look into renting one. |
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 Money Eating Baggage Owner
Posts: 9586
Location: Phoenix | That's tricky. Good luck in whatever you do! Like others are saying, seems best to secure the house before you do anything drastic. I would almost lean towards maybe going half towards house and half towards new pickup? |
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Sideways Riding Expert
Posts: 11371
Location: ND--it snows, it floods, it snows, it floods | Or here's an option...pay down on the student loans, wait on the house and purchase a decent USED truck now. Can you purchase the truck in your SO's name to help him build a credit history and then in 6 months to 1 year look at houses? |
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 Loves to compete
Posts: 5760
Location: Oakdale, CA | docschic - 2014-05-11 10:54 AM Or here's an option...pay down on the student loans, wait on the house and purchase a decent USED truck now. Can you purchase the truck in your SO's name to help him build a credit history and then in 6 months to 1 year look at houses?
I agree. Dave Ramsey would tell you to sell truck and pay off smallest loan. It might be hard for a little while but you will be really glad about your decision when you have less obligations.......
goodluck!
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Extreme Veteran
Posts: 316
| My student loans are the last thing I plan to pay off. I pay off other consumer debt before making any larger payments on my student loans. I would rather have a student loan and mortgage than a pick up payment or credit card payment. I'm surprised you haven't been able to lock in a lower interest rate on your student loan and have such a large payment. I owe almost twice as much and my interest rate is lower and payment is locked in and is lower, but unfortunately that maybe because I have mine extended out farther than you do. And I completely agree about trying your best to not get any more debt until you close on the house. My experience as being an analyst at a bank is that they can re-run your credit and double check everything prior to funding. |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| We are planning on purchasing a used truck, just newer than what I have now. Renting a truck is not an option because we lease so much land and cut hay for several months straight.
I'm definitely planning on putting the truck is SO's name. I just want to get at least one thing completely paid off. I would much rather have one $400 payment than a couple different ones. |
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Here we go again
Posts: 1581
| Student loans are the last thing I would payoff. Why you may ask? Because they provide a higher credit rating, along with a mortgage, than does any unsecured debt such as credit cards and auto loans.
Also, definitely DO NOT aquire any new financing in your name or anyones name that will be qualifying for a mortgage. Your lending company WILL check your credit just before funding.
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Veteran
Posts: 103
| I would not buy anything else until this house deal is done. Put the money from the sell of your truck in the bank. Less debt and a hefty bank account go a long way in getting something big like a house financed. Then after you are in the house, you can decide. I would not ever spend that much money at one time because it is so hard to put it back. You could pay some of it on something, make a nice down payment on your next truck and keep you some back. You never know. First year of home ownership can be a little nerve racking. |
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 Dr. Ruth
Posts: 9891
Location: Blissfully happy Giants fan!!! | Mortgages are tricky. So your husband has a good credit score? Like what kind of good? I am surprised about the 45 day thing. That sounds weird to me.
Major changes to your credit send red flags to mortgage people. You need to NOT make ANY large purchases for at least 60 days before you want to get a home. And DO NOT use your credit cards, buy furniture, new cars, etc until the bank has FUNDED your loan. Not closed, FUNDED.
Also, remember that if you retain cash for your down payment, you will have a lot of explaining to do and they will likely want to see that money sitting somewhere that you can provide proof that it has been sitting there, not used, for 60 days (2 bank statements worth).
Sounds like you NEED a truck. So if it were me, trying to buy a house is probably something you should think about maybe 6 months from now. Credit established, things paid off, money in the bank. Basically, stabilization. Get the truck you need, get everyone's credit where it needs to be, and then think about the down payment and a home loan. |
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Elite Veteran
Posts: 629
Location: Roping pen | In the biz and a deal breaker, would be more term debt or selling your current vehicle while waiting for the house deal to go thru for me. Beg, borrow, or fix a vehicle until you get house deal done. If you sell that vehicle, your ratios change and you may no longer qualify.
I have went to closings, pulled a new Credit Bureau, found new term debt/changes to financial conditions and was unable to close.
Putting the vehicle in your SO name, is just a shell game. Not a way to start a lending relationship.
Do not enter into a new pickup deal until you are comfortable with house payments. EVERY real estate purchase I have ever done, needed cash. From insurance, closing costs, unexpected maintenance, moving costs, utility hookups, start up costs, or additional downpayment, all take an unbelievable amount of cash.
Good luck!
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Damn Yankee
Posts: 12390
Location: Somewhere between raising hell and Amazing Grace | I'll chip in again.....
I know you guys want to buy a house. But it also sounds like you really need a truck to make a living so I would do what you need to in order to ensure that you can get the hay done. Also, if you are trying to build YOUR credit, just getting credit cards won't help short term. I tried that. Never had a credit card until three years ago. They still haven't really helped much. It takes a while for them to build it. The biggest thing they are looking for is length of history. So if you guys are going to buy a house in the next few years, I wouldn't worry as much about getting cards.
I agree that studen loans will probably show a better history for your credit then a lot of other stuff.
When hubby and I purchased our home, he was the only one on the loan for two reasons. Because his credit is better then mine, and so that if we did need anything else in the meantime, we could put it in my name so i didn't hurt the house loan. We are still both named on the house, but the financing is only in his name. |
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Damn Yankee
Posts: 12390
Location: Somewhere between raising hell and Amazing Grace | Spin Doctor - 2014-05-12 9:26 AM In the biz and a deal breaker, would be more term debt or selling your current vehicle while waiting for the house deal to go thru for me. Beg, borrow, or fix a vehicle until you get house deal done. If you sell that vehicle, your ratios change and you may no longer qualify. I have went to closings, pulled a new Credit Bureau, found new term debt/changes to financial conditions and was unable to close. Putting the vehicle in your SO name, is just a shell game. Not a way to start a lending relationship. Do not enter into a new pickup deal until you are comfortable with house payments. EVERY real estate purchase I have ever done, needed cash. From insurance, closing costs, unexpected maintenance, moving costs, utility hookups, start up costs, or additional downpayment, all take an unbelievable amount of cash. Good luck!
We were so very lucky with our house deal....we went VA loan, so first didn't have to have money down, and second, since hubby carries a disability rating from his time in the Marines, we also were exempt from the 3500 funding fee. AND we got money back at closing based on the interest rates we chose through USAA.
But even if you get that lucky, Spin made a good point, keep cash on hand!!! You will need it for gosh knows what. We had to dump about 8k to build stalls and put up fencing, get a new fridge, and just very minor things. We knew that well before we made an offer on the home, but no matter the circumstances, always have some cash set aside for expenses. |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| sassy&tessa - 2014-05-12 8:25 AM Mortgages are tricky. So your husband has a good credit score? Like what kind of good? I am surprised about the 45 day thing. That sounds weird to me.
Major changes to your credit send red flags to mortgage people. You need to NOT make ANY large purchases for at least 60 days before you want to get a home. And DO NOT use your credit cards, buy furniture, new cars, etc until the bank has FUNDED your loan. Not closed, FUNDED.
Also, remember that if you retain cash for your down payment, you will have a lot of explaining to do and they will likely want to see that money sitting somewhere that you can provide proof that it has been sitting there, not used, for 60 days (2 bank statements worth).
Sounds like you NEED a truck. So if it were me, trying to buy a house is probably something you should think about maybe 6 months from now. Credit established, things paid off, money in the bank. Basically, stabilization. Get the truck you need, get everyone's credit where it needs to be, and then think about the down payment and a home loan.
His credit score is in the 800's.
How the mortgage guy explained it to me was that while SO has excellent credit, he only has one line. I have 3 lines, but it's not as high as SO's score. I haven't been building my credit as long as SO has. Since SO makes a lot more than I do, we need to build his credit. That's why he told us to get a secured credit card and establish a good history right away (He said get $40 worth of gas, pay it off the next week, then do the same thing over again and have 2 payments made before SO gets his first statement), then come back in 45 days and he could get us preapproved. We have nothing in writing right now.. Realistically we would like to be in a home 4-6 months from now. |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| We are good in the "cash on hand" department. I keep a fairly large sum of money in the bank at all times, I don't allow my checking to go below a certain amount, ever.
I don't use credit cards anymore. I have my truck payment and my student loan payment for credit, that's it. Everything else is paid off.
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Married to a Louie Lover
Posts: 3303
| Have you shipped around for other mortgage lenders? That sounds odd to me, although I know lending has gotten a lot more strict. Obviously don't know the specifics of the credit or income etc, but I had no trouble qualifying for a mortgage on my own with a credit score in the 700's. Wondering if not being married has anything to do with it? Have you guys thought about going through the legal part of getting hitched so you aren't two people buying a house, but a legal unit buying a house?
When I bought my house last summer I had to sign an agreement with the bank after I signed a contract to buy the house that I would do nothing to harm my credit score prior to closing or they could pull the loan at any time.
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The Famous Hot Wing Chicken Girl
Posts: 2964
| OhMax - 2014-05-12 11:14 AM Have you shipped around for other mortgage lenders? That sounds odd to me, although I know lending has gotten a lot more strict. Obviously don't know the specifics of the credit or income etc, but I had no trouble qualifying for a mortgage on my own with a credit score in the 700's. Wondering if not being married has anything to do with it? Have you guys thought about going through the legal part of getting hitched so you aren't two people buying a house, but a legal unit buying a house? When I bought my house last summer I had to sign an agreement with the bank after I signed a contract to buy the house that I would do nothing to harm my credit score prior to closing or they could pull the loan at any time.
We have gotten the run around before because we aren't married. We actually had a man refuse to deal with us because we aren't married (we weren't engaged at the time.) We are engaged though and getting married this summer. |
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Dr. Ruth
Posts: 9891
Location: Blissfully happy Giants fan!!! | Personally, on a lender's perspective, I would truly wait for about 6 months. It sounds like all sorts of things are going on, need to be changed or are changing (ie credit, truck, marriage), and that is going to make getting a mortgage a complete and udder NIGHTMARE for you. I promise you. If you wait until all of the dust has settled, I would be willing to bet that you have a much better experience and a nicer time.
PS-if he has an 800 credit score, a secured card is ridiculous. He can get an open line but I would get an auto loan before trying to build credit on a cc. |
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 Veteran
Posts: 173
Location: Somewhere over the rainbow | I am in lending compliance at a large bank. It is illegal to discriminate on the basis of marital status. |
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Veteran
Posts: 173
Location: Somewhere over the rainbow | I am a compliance manager at a large bank. It's illegal to discriminate based on marital status. ECOA is the regulation. |
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Extreme Veteran
Posts: 316
| sassy&tessa - 2014-05-12 10:38 AM Personally, on a lender's perspective, I would truly wait for about 6 months. It sounds like all sorts of things are going on, need to be changed or are changing (ie credit, truck, marriage), and that is going to make getting a mortgage a complete and udder NIGHTMARE for you. I promise you. If you wait until all of the dust has settled, I would be willing to bet that you have a much better experience and a nicer time.
PS-if he has an 800 credit score, a secured card is ridiculous. He can get an open line but I would get an auto loan before trying to build credit on a cc.
This is what I thought. And also, paying the balance off before the statement comes doesn't build up credit history. Your mortgage lender doesn't really make sense to me. The other thing is having a secured card for 45 days wouldn't build up enough history to make that big of a difference, I wouldn't think. In any kind of presentation I've given on building credit, it's my understanding or what I have told people is to go to your local tire store and open an account. Then buy some chains or tires or something and make one minimum payment the first month and then pay off the balance at the second statement. This way they have something they can actually report to the credit bureau.
Thats great that all you have for debt is a pick up payment and student loan. Good job!! |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| GWR - 2014-05-12 11:10 PM sassy&tessa - 2014-05-12 10:38 AM Personally, on a lender's perspective, I would truly wait for about 6 months. It sounds like all sorts of things are going on, need to be changed or are changing (ie credit, truck, marriage), and that is going to make getting a mortgage a complete and udder NIGHTMARE for you. I promise you. If you wait until all of the dust has settled, I would be willing to bet that you have a much better experience and a nicer time.
PS-if he has an 800 credit score, a secured card is ridiculous. He can get an open line but I would get an auto loan before trying to build credit on a cc. This is what I thought. And also, paying the balance off before the statement comes doesn't build up credit history. Your mortgage lender doesn't really make sense to me. The other thing is having a secured card for 45 days wouldn't build up enough history to make that big of a difference, I wouldn't think. In any kind of presentation I've given on building credit, it's my understanding or what I have told people is to go to your local tire store and open an account. Then buy some chains or tires or something and make one minimum payment the first month and then pay off the balance at the second statement. This way they have something they can actually report to the credit bureau.
Thats great that all you have for debt is a pick up payment and student loan. Good job!!
I know he has a tab through our local small town auto parts store, but I don't think they report anything. I'll have to check on that though. Also, he has a company credit card that his boss got for him, since he runs his area of the company. Does that build his credit? Some people have told me yes and others have told me no.
Edited by cowgirlchic 2014-05-13 3:50 PM
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Married to a Louie Lover
Posts: 3303
| Pull a credit report on yourself and him from one of the agencies, you get 1 free per year. That way you'll see what is an isn't reported and anything you didn't know about. I use experian |
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 That's White "Man" to You
Posts: 5515
| Annualcreditreport.com You get a free copy from each of the bureau's each year. |
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Extreme Veteran
Posts: 316
| cowgirlchic - 2014-05-13 1:47 PM GWR - 2014-05-12 11:10 PM sassy&tessa - 2014-05-12 10:38 AM Personally, on a lender's perspective, I would truly wait for about 6 months. It sounds like all sorts of things are going on, need to be changed or are changing (ie credit, truck, marriage), and that is going to make getting a mortgage a complete and udder NIGHTMARE for you. I promise you. If you wait until all of the dust has settled, I would be willing to bet that you have a much better experience and a nicer time.
PS-if he has an 800 credit score, a secured card is ridiculous. He can get an open line but I would get an auto loan before trying to build credit on a cc. This is what I thought. And also, paying the balance off before the statement comes doesn't build up credit history. Your mortgage lender doesn't really make sense to me. The other thing is having a secured card for 45 days wouldn't build up enough history to make that big of a difference, I wouldn't think. In any kind of presentation I've given on building credit, it's my understanding or what I have told people is to go to your local tire store and open an account. Then buy some chains or tires or something and make one minimum payment the first month and then pay off the balance at the second statement. This way they have something they can actually report to the credit bureau.
Thats great that all you have for debt is a pick up payment and student loan. Good job!!
I know he has a tab through our local small town auto parts store, but I don't think they report anything. I'll have to check on that though. Also, he has a company credit card that his boss got for him, since he runs his area of the company. Does that build his credit? Some people have told me yes and others have told me no.
I would say at this point you don't want to cancel them because it'll hurt the credit score, but I'm not 100% sure. I hate to say it, but I would consult another mortgage lender. And for sure pull your credit report on the website they listed above. It'll be free and at least you can see what open accounts you have. |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| Thanks! After reading a few posts up I have already decided to consult another mortgage lender. Hopefully the 3rd time will be the charm! |
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 The One
Posts: 7998
Location: South Georgia | cowgirlchic - 2014-05-14 10:02 AM Thanks! After reading a few posts up I have already decided to consult another mortgage lender. Hopefully the 3rd time will be the charm! I think this is your best bet. What they told you seems a bit off and far fetched. With a score of 800, the cards are in your favor. It shouldnt be much of a problem at all to obtain a mortgage. I have always had the best experiences at a mortgage broker. They do all the leg work for the mortgage and then sell the account to a bank for the best rate possible.
Edited by horsegirl 2014-05-14 9:35 AM
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The Famous Hot Wing Chicken Girl
Posts: 2964
| Another question for you all..
I have a couple of store cards that I paid off a while ago. Is it going to hurt my credit if I close them? If I am buying a new truck today, should I wait a while to close them off? I don't want it to mess anything up with that deal. |
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The One
Posts: 7998
Location: South Georgia | Generally, you dont close a card with zero balance. It helps your utilization ratio to have that unused available credit out there. It shows that despite having the ability to charge things, you restrain yourself. Its a good thing. Closing cards, however, can lower your score because it would then show less available credit. |
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The Famous Hot Wing Chicken Girl
Posts: 2964
| Thanks! I had been told that the more credit you had avaliable hurt you, especially if it was just sitting, and it would be harder to get lended anything. |
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Veteran
Posts: 173
Location: Somewhere over the rainbow | When you have credit that is available to use but you don't use it, it demonstrates that you live within your means with a level of responsibility. You get good point for that.
:) |
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The One
Posts: 7998
Location: South Georgia | BabyJ - 2014-05-14 1:57 PM When you have credit that is available to use but you don't use it, it demonstrates that you live within your means with a level of responsibility. You get good point for that. :)
Ditto. |
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Extreme Veteran
Posts: 316
| It's true it's good to see someone who has restraint by having available credit, but not using it. The only other side of that is that I know as a commercial analyst I had to treat the debt as if it was maxed out, so if you had a $20,000 limit on a card I would figure about a payment that was equal to 2% of the balance. I also know that when we went to get our place refinanced that they did the same thing. WITH that said...I would not close those accounts right now. It will bring your credit score down a few points for a little while. I would wait to close those accounts until after all your financing is done. It is true though that if you only have say one or two credit cards and they are maxed out or close to max it will bring your credit score down. That's why it's not a bad idea if that's the case to leave a couple zero balance accounts open.
Also, just a little extra bit of information. Most likely when your mortgage closes, your credit scores will go down a bit. The reason is not only did you take on more debt, but now you are being compared to other people who have had a mortgage for 20 years.
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Anyone in finance? Question