Options for consolidating debt intto first mortgage?
Hi,
I’m a first-time home buyer with excellent credit ( around 740’s ) and I’m in the process of buying my first home. I have some credit card debt that I would like to roll into my mortgage. This would help me out significantly from a cash flow perspective. What are my options and how would this effect my rate. I also have about 5% down saved up.
Thanks.
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Congratulations on your soon to be purchase.
If you really need to get rid of the debt, I would use some of the money that you have saved for a downpayment. Even if you could roll your debts into the mortgage – the end result would probably be the same. Owing a home is a big responsiblity so, if this debt bothers you that much, get rid of it before you become a homeowner.
I can help! Shoot me an email to msmith@premierloangroup.com, and let’s chat!
Marty
You have not purchased the home yet so you have no legal interest in the property. That is the first thing to keep in mind. Second: lenders will NOT loan you $$$ in a purchase transaction to pay of other debt you owe. They will only give you the money to buy the home (and at that, the lesser of the purchase price or appraised value). Finally you will have 5% equity in the home to go towards a 2nd mortgage to consolidate your debts. You can do this almost immedately after you buy the home.
Typically a lender will say the value of the home is what you bought it for – even if it appraises higher – for the 1st 12 months.
Mortgage investors lend on real property, not on unsecured debt. Mortgage loan loan to value is predicated on the sales price or appraised value, whichever is less. If is not possible to finance additional debt into a home purchase. With a 5% down payment you won’t have sufficient equity to opt for a second mortgage home equity line to pay off the additional debt either. Sorry.
On the other hand, you wouldn’t be approved for financing if you didn’t meet the investor’s debt to income ration guidelines. Buying a home often means some lifestyle adjustments.
Enjoy your new home.
In the first place if you can scrape up 20% down you can save yourself a lot of money in not having to get mortgage protection insurance. Adding in other debt into a mortgage will seem to give you better cash flow right now, but in the long run it’s not a good idea. You could in effect be paying for that tank of gas you bought on that credit card for 15 to 30 if the debt was rolled into your mortgage.