Pay down Credit Card debt, to Increase Loan amount ..........

2 Replies

Good Evening

I need some help in figuring out what to do with paying off 2 credit cards, and by doing so.... Increasing the amount that I can borrow for the purchase of a property, by another $10,000  ( I came up with $10,000 , because I have heard that for each $25 that you have in monthly debt... credit card debt in my case ) , that you can borrow an extra $5,000 for each $25 monthly debt that you pay off

I have 2 cards, with fairly low amounts.... one has around $550 and the other as around $650

So with $1,200 , I could pay both of these cards off completely , which would then leave me with 2 credit cards left ( minimum payments per month on the two, total about $110 per month )

My dilemma is..... due to my income over the past few years ( via my tax returns ), and added with it ..... the Max DTI ratio for an FHA loan ( 50% max I think ? )

I need as much " House " as I can get ( qualify for ), as to get a nice enough house that is in a desirable and nice neighborhood in my area ( Memphis,TN )

Right now I got a Monthly payment " Itemized Worksheet " from my Lender, showing me, that on a $65,000 loan.... my Monthly payment ( PITI ) would be $520

I am wanting to get it, to where I can qualify for a house in the $80,000 - $85,000 price range..... using the Itemized Worksheet on a $65,000 loan and the monthly PITI being $520 ..... I'm assuming that an $85,000 loan ( house ) would put my note at right around $650 ( and $580 on a $75,000 loan )

I am basing these umbers on the fact that.... for every $10,000 that I add to the loan, that the monthly note increases by about $60

To me.... the  " cheapest " and most logical way to achieve this, seems to be for me to spend the $1,200 and pay off these 2 credit cards ?

Thank you to any and everyone for their insight, recommendation and help,

I really appreciate it

You are correct.  Those 2 cards will need to be paid off to lower it.

Keep in mind all monthly debts such as student loans, credit cards, car payment will all factor into your dti.   What hurts the most is when those credit cards are maxed out as that can lower your score if your credit utilization is high.  You want your credit utilization of your credit cards to be under 9%.

Do you have any other monthly debts besides the 2 credit cards?

Hi Brent,

I really appreciate your reply

Keep in mind all monthly debts such as student loans, credit cards, car payment will all factor into your dti. What hurts the most is when those credit cards are maxed out as that can lower your score if your credit utilization is high. You want your credit utilization of your credit cards to be under 9%.

I never thought about the utilization of my credit cards , as coming into play.... very great tip . Thank you for sharing

I have one card that is definitely above the 9% mary ( unfortunately )

It's got a max of $10,000  and I still owe around $4,200 on it

The other three..... one has a balance of around $500, the second has a balance of close to $700 and the third has about $1,800 ( and is a 0% interest Chase card for 15 months )


Do you have any other monthly debts besides the 2 credit cards?

well, I have 4 cards total, with totals of.... $4,200 , $500,  $700  and  $1,800

So about $7,200 total for all of my debts

The monthly " minimum " payments for the 4 cards is... $160

What I am trying to make sure of is.... That I can qualify for at least an $85,000 ( purchase price ) house

I make $1,700 a month ( based on 2 years of taxes ), so given FHA's DTI guidelines, I want to make sure that I can qualify for a property around the $85,000 range

My Credit score is a 690


This is why I'm thinking of paying my 2 lowest credit cards off entirely, and then hopefully allowing me to borrow / qualify for that $85,000 range

Thank you again for your time and help, I really appreciate it  

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