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Answers (16)
- BMFPitt
- Contributions:1207
I think the question of what proof your lender will accept is going to depend on your specific lender, so you should probably ask them. I would think most would be satisfied with an online statement to be backed up with more later.
I know that I had all kinds of hassle proving that I had the funds to pay my down payment - 3 months after I paid it - because I only gave statements from my savings account (where all my house money was), but had to transfer it to a different bank where my checking account is to make the payment. It's amazing how something so simple and logical can become a headache when getting a mortgage.
I know that I had all kinds of hassle proving that I had the funds to pay my down payment - 3 months after I paid it - because I only gave statements from my savings account (where all my house money was), but had to transfer it to a different bank where my checking account is to make the payment. It's amazing how something so simple and logical can become a headache when getting a mortgage.
- Loves LA
- Contributions:14
"...IF i were to pay off the car today, and try to get a mortgage tomorrow, will i be able to prove to them that it's paid off with just a copy of an online statement?"...
I don't know if this ever got answered, it doesn't seem so but in a similar situation, my bank approved me only under the condition I paid off my credit cards first.
The bank accepted just seeing my "internet receipts" contingent that I also showed my actual statements later when they became available, to confirm I didn't go right back out and charge them all back up, lol
Hope that helps.
I don't know if this ever got answered, it doesn't seem so but in a similar situation, my bank approved me only under the condition I paid off my credit cards first.
The bank accepted just seeing my "internet receipts" contingent that I also showed my actual statements later when they became available, to confirm I didn't go right back out and charge them all back up, lol
Hope that helps.
- lowbuyer
- Contributions:20
I'm in a similar position. As Azrob and Fydell said,debt-to-income ratio is very important. I'm in the market for a condo, so I spoke with my lender regarding one property I was interested in. Given I'm buying alone, they said I'd most likely have to pay down my car loan before qualifying (depending on the mortgage amount of course).
Anyway, in your situation, I think it would be more beneficial to pay down the car loan. The longer your timeframe to buy, the more sense it makes to pay it off - if you save the $600 each month you're putting towards the car! And you'll be saving whatever interest you're paying each month - depending on how long ago you bought the car (you may more interest at the start of a loan) and your current interest rate, it could be a lot of money! The PMI will definitely be less than your car payment, and don't forget the peace of mind from having one less bill in the meantime. The only concern about paying it down would be if you don't have any other types of loans out. Credit bureaus like to see a mix of different types of debt. But I think there would be more benefit to paying it off, including peace of mind.
As far as what you need to suffice as proof that it's paid, I believe you need documentation from the lender, ie a confirmation letter, title, etc, but if I were you. I'd speak with a lender to get pre-approved and they can clear up all your questions for you as well.
Anyway, in your situation, I think it would be more beneficial to pay down the car loan. The longer your timeframe to buy, the more sense it makes to pay it off - if you save the $600 each month you're putting towards the car! And you'll be saving whatever interest you're paying each month - depending on how long ago you bought the car (you may more interest at the start of a loan) and your current interest rate, it could be a lot of money! The PMI will definitely be less than your car payment, and don't forget the peace of mind from having one less bill in the meantime. The only concern about paying it down would be if you don't have any other types of loans out. Credit bureaus like to see a mix of different types of debt. But I think there would be more benefit to paying it off, including peace of mind.
As far as what you need to suffice as proof that it's paid, I believe you need documentation from the lender, ie a confirmation letter, title, etc, but if I were you. I'd speak with a lender to get pre-approved and they can clear up all your questions for you as well.
- BMFPitt
- Contributions:1207
A $60K investment at current mortage rates over the life of a mortgage is a pitiful return.
5.5% might not be great, but it is very decent, but not way far off of historical returns on the S&P 500 of about 9%, and without any of the risks. ESPECIALLY since you are talking about a 5-7 year time window during a recession/depression that may last nearly that long. On a short time horizon (and that's what 5-7 years is) you should take the guaranteed money.
My whole point is that you MAY (and in my opinion, probably WILL) be better off making as small a downpayment as possible (and investing the money you DIDN'T use making the downpayment).
I know what you're saying. I'm just pointing out why you're wrong.
So what if you have $200 a month PMI and a slightly smaller monthly mortgage payment if you have $60K in your pocket?
There are cases where that makes sense, but for pure ROI he's almost certainly going to do better with the 20% down and no PMI. You would need a 10% annual return just to break even with interest and PMI.
5.5% might not be great, but it is very decent, but not way far off of historical returns on the S&P 500 of about 9%, and without any of the risks. ESPECIALLY since you are talking about a 5-7 year time window during a recession/depression that may last nearly that long. On a short time horizon (and that's what 5-7 years is) you should take the guaranteed money.
My whole point is that you MAY (and in my opinion, probably WILL) be better off making as small a downpayment as possible (and investing the money you DIDN'T use making the downpayment).
I know what you're saying. I'm just pointing out why you're wrong.
So what if you have $200 a month PMI and a slightly smaller monthly mortgage payment if you have $60K in your pocket?
There are cases where that makes sense, but for pure ROI he's almost certainly going to do better with the 20% down and no PMI. You would need a 10% annual return just to break even with interest and PMI.
- falsedawn
- Contributions:98
You guys need to get a clue about investments and asset classes in general and what the historical returns have been, and are likely to be going forward...
A $60K investment at current mortage rates over the life of a mortgage is a pitiful return. There's a reason most 401Ks are heavily weighted towards stocks...
"If his tax rate was 33%, the deduction would save him a whopping $19 per month at 6% interest. For that savings he'd be paying $200+ in PMI (not to mention the interest itself.)"
What? That's not at all what I'm saying
My whole point is that you MAY (and in my opinion, probably WILL) be better off making as small a downpayment as possible (and investing the money you DIDN'T use making the downpayment). So what if you have $200 a month PMI and a slightly smaller monthly mortgage payment if you have $60K in your pocket? I know what I'd prefer...
Why not get tax deductions on a larger mortgage payment? It's a free gift from Uncle Sam.
In any case, I am in a similar position - next year I am going to start looking to buy, and I intend to do exactly what I've said - even though I could afford a 20% downpayment, I'm not going to - it makes absolutely no financial sense in the current market.
A $60K investment at current mortage rates over the life of a mortgage is a pitiful return. There's a reason most 401Ks are heavily weighted towards stocks...
"If his tax rate was 33%, the deduction would save him a whopping $19 per month at 6% interest. For that savings he'd be paying $200+ in PMI (not to mention the interest itself.)"
What? That's not at all what I'm saying
My whole point is that you MAY (and in my opinion, probably WILL) be better off making as small a downpayment as possible (and investing the money you DIDN'T use making the downpayment). So what if you have $200 a month PMI and a slightly smaller monthly mortgage payment if you have $60K in your pocket? I know what I'd prefer...
Why not get tax deductions on a larger mortgage payment? It's a free gift from Uncle Sam.
In any case, I am in a similar position - next year I am going to start looking to buy, and I intend to do exactly what I've said - even though I could afford a 20% downpayment, I'm not going to - it makes absolutely no financial sense in the current market.
- BMFPitt
- Contributions:1207
After taking into account the tax-deductibility? I doubt it.
If his tax rate was 33%, the deduction would save him a whopping $19 per month at 6% interest. For that savings he'd be paying $200+ in PMI (not to mention the interest itself.)
I'm pretty sure that $60K invested in even a mediocre-returning fund over 5-7 years is going to result in a better net position
I think that's highly questionable. And putting 20% down has a guaranteed return, whereas a mutual fund could easily lose money over then next few years.
If his tax rate was 33%, the deduction would save him a whopping $19 per month at 6% interest. For that savings he'd be paying $200+ in PMI (not to mention the interest itself.)
I'm pretty sure that $60K invested in even a mediocre-returning fund over 5-7 years is going to result in a better net position
I think that's highly questionable. And putting 20% down has a guaranteed return, whereas a mutual fund could easily lose money over then next few years.
- falsedawn
- Contributions:98
Rob,
lol, you need to be a bit more open minded. Just because someone disagrees with your opinion does not mean their advice is terrible. You are a bit of an elitist, aren't you?
LPMI can be gotten rid of with refinancing quite easily, and these days, since most people move in 5-7 years, it's really a non-issue. In any case, I was only suggesting that it be done for tax-deductibility purposes. PMI may be a better bet, it depends on the individual's circumstances.
"And what "opportunity cost" of 60K are you freaking talking about?"
A 20% downpayment on a 400K loan is $80K, a 5% downpayment is $20K, that's your $60K opportunity cost lost right there.
"His home interest rate is certainly going to be higher than banking return on his money."
After taking into account the tax-deductibility? I doubt it. Unless you're talking about a bog-standard current account, and who keeps substantial amounts of money in those these days?
Mortages are the cheapest source of money you can get right now - I'm pretty sure that $60K invested in even a mediocre-returning fund over 5-7 years is going to result in a better net position even if
1) Your mortgage is higher.
2) You are paying PMI (OR a higher interest rate thru LPMI)
In any case, a decent LO would be able to draw you all sorts of tables explaining the pros and cons of each under differing scenarios.
lol, you need to be a bit more open minded. Just because someone disagrees with your opinion does not mean their advice is terrible. You are a bit of an elitist, aren't you?
LPMI can be gotten rid of with refinancing quite easily, and these days, since most people move in 5-7 years, it's really a non-issue. In any case, I was only suggesting that it be done for tax-deductibility purposes. PMI may be a better bet, it depends on the individual's circumstances.
"And what "opportunity cost" of 60K are you freaking talking about?"
A 20% downpayment on a 400K loan is $80K, a 5% downpayment is $20K, that's your $60K opportunity cost lost right there.
"His home interest rate is certainly going to be higher than banking return on his money."
After taking into account the tax-deductibility? I doubt it. Unless you're talking about a bog-standard current account, and who keeps substantial amounts of money in those these days?
Mortages are the cheapest source of money you can get right now - I'm pretty sure that $60K invested in even a mediocre-returning fund over 5-7 years is going to result in a better net position even if
1) Your mortgage is higher.
2) You are paying PMI (OR a higher interest rate thru LPMI)
In any case, a decent LO would be able to draw you all sorts of tables explaining the pros and cons of each under differing scenarios.
- Min Kim, "iamnamja"
- Contributions:42
Hi guys,
Thanks for all the contributions. But I still have one question... so IF i were to pay off the car today, and try to get a mortgage tomorrow, will i be able to prove to them that it's paid off with just a copy of an online statement? or do i have to wait until the actual statement arrives? or until the credit agencies pick up on them?
Thanks for all the contributions. But I still have one question... so IF i were to pay off the car today, and try to get a mortgage tomorrow, will i be able to prove to them that it's paid off with just a copy of an online statement? or do i have to wait until the actual statement arrives? or until the credit agencies pick up on them?
- BMFPitt
- Contributions:1207
Is it really worth losing the opportunity cost of $60K to avoid having to pay an extra $150 a month?
The point at which 60k = $150 monthly payment is with negative 0.75% interest. If you can find a deal like that, take it! (That doesn't include the cost of PMI.)
Maybe you should learn what opportunity cost is, because it's hard to find a safe investment that returns anywhere near the current mortgage interest rate.
The point at which 60k = $150 monthly payment is with negative 0.75% interest. If you can find a deal like that, take it! (That doesn't include the cost of PMI.)
Maybe you should learn what opportunity cost is, because it's hard to find a safe investment that returns anywhere near the current mortgage interest rate.
- NTETS, "Mr Caveat"
- Contributions:6436
pay off the car and then choose a home that is under 400k, kill 3 birds with a single stone...
1) no car payment, no interest on car loan
2) no PMI, more of the money goes directly to loan + equity
3) you can afford the mort easilly enough to either pay down the loan faster(every dollar you pay saves a dollar in interest) or create another reserve fund. do not under any circumstances rely on or calculate for yearly appreciation to create your equity cusion.
0.02
PS false dawn is trying to suggest that your paying 5-6%(+150/month in fees) interest to borrow money that you dont need to because you can collect 3% yeild(if you are lucky)?
1) no car payment, no interest on car loan
2) no PMI, more of the money goes directly to loan + equity
3) you can afford the mort easilly enough to either pay down the loan faster(every dollar you pay saves a dollar in interest) or create another reserve fund. do not under any circumstances rely on or calculate for yearly appreciation to create your equity cusion.
0.02
PS false dawn is trying to suggest that your paying 5-6%(+150/month in fees) interest to borrow money that you dont need to because you can collect 3% yeild(if you are lucky)?
falsedawn:
TERRIBLE advice...
first off, rolling the pmi into the interest rate means paying it for the entire time you keep the home, generally a terrible idea if you are going to keep the home for a while; PMI can be gotten rid of, the higher interest rate can't.
And what "opportunity cost" of 60K are you freaking talking about? His home interest rate is certainly going to be higher than banking return on his money.
In short, while I agree that NEVER having a car loan makes better sense, in this particular case, living with the car loan for a year or two more, rather than paying a completely unneeded expense (PMI on the mortgage) is likely to be a net better plan. The two potential problems are having higher payments until the car is gone, and actually getting the loan while still having the car payment, but assuming he can swing that, it will save money.
TERRIBLE advice...
first off, rolling the pmi into the interest rate means paying it for the entire time you keep the home, generally a terrible idea if you are going to keep the home for a while; PMI can be gotten rid of, the higher interest rate can't.
And what "opportunity cost" of 60K are you freaking talking about? His home interest rate is certainly going to be higher than banking return on his money.
In short, while I agree that NEVER having a car loan makes better sense, in this particular case, living with the car loan for a year or two more, rather than paying a completely unneeded expense (PMI on the mortgage) is likely to be a net better plan. The two potential problems are having higher payments until the car is gone, and actually getting the loan while still having the car payment, but assuming he can swing that, it will save money.
- falsedawn
- Contributions:98
If it was my choice, I'd pay off the car in a heartbeat and get the best rate I could with the lowest downpayment possible. I'd aim for 10% down at the most. Who cares if you have to pay PMI? Is it really worth losing the opportunity cost of $60K to avoid having to pay an extra $150 a month?
That way you also have a nice cushion of cash left for emergencies/investing etc.
I'd also consider LPMI so your PMI payments are rolled into the rate and become tax-deductible, if PMI is not deductible in your state.
There are two separate questions:
1. Will your debt/income ratios be within guidelines with the car loan still in place?
2. which one will save you money?
IF you can qualify for the mortgage without paying off the car, and the extra car money allows you avoid PMI, you might consider the following:
1. buy home, 20% down, avoid PMI.
2. throw extra money left over after closing at the car loan to reduce it as quickly as possible.
anyways, best of luck!
1. Will your debt/income ratios be within guidelines with the car loan still in place?
2. which one will save you money?
IF you can qualify for the mortgage without paying off the car, and the extra car money allows you avoid PMI, you might consider the following:
1. buy home, 20% down, avoid PMI.
2. throw extra money left over after closing at the car loan to reduce it as quickly as possible.
anyways, best of luck!
- BMFPitt
- Contributions:1207
If you do pay off the car, make sure there's not a minimum amount of time you have to carry PMI. On some loans it's 5 years, even if you get your 22% stake in the first month. Also remember that while your car payment is probably at least 50% going into equity in your car, PMI provides absolutely no benefit to you, and putting down 20% might get you a slightly better rate.
As long as you can afford to carry the $600 payment and the mortgage at the same time, you'll probably be better off in the long term putting 20% down, unless you're paying much more on interest on the car than you would be on your mortgage.
Your best bet is to just ask the lender what difference it might make to choose either option.
As long as you can afford to carry the $600 payment and the mortgage at the same time, you'll probably be better off in the long term putting 20% down, unless you're paying much more on interest on the car than you would be on your mortgage.
Your best bet is to just ask the lender what difference it might make to choose either option.
- Min Kim, "iamnamja"
- Contributions:42
Great. thanks for your input.. i agree with you in regards to the pmi...
just one more quick question. if i pay off my car today, and i go to get my mortgage tomorrow.. can i show my online statement to confirm that my car payment no longer exists? or do i have to wait at least 1 billing cycle? or until it shows up on my credit report? Thanks.
just one more quick question. if i pay off my car today, and i go to get my mortgage tomorrow.. can i show my online statement to confirm that my car payment no longer exists? or do i have to wait at least 1 billing cycle? or until it shows up on my credit report? Thanks.
- Fydell
- Contributions:514
In the current market conditions banks are paying close attention to debt ratios and, unlee your income is high enough, your $600 car payment is going to hurt you despite your excellent creidt score.
If you put close to 20% down it might well make sense to swap the car payment for a PMI premium.
And bear in mind when your equity reaches 20% then you can drop the PMI - assuming that your house rises in value.
If you put close to 20% down it might well make sense to swap the car payment for a PMI premium.
And bear in mind when your equity reaches 20% then you can drop the PMI - assuming that your house rises in value.
pay off car now? or later?
I have roughly 110k for my downpayment money for my next house.
I'm still not sure which house i will buy, but the price ranges from 350k to 550k.
anyhways.... i'm planning on setting aside roughly 30k to pay off my car (20k left on loan plus closing cost) since the payment on the car is 600 monthly.
i know that if i do this, i won't have 20% for some of these houses....
now.. my main question is should i wait to pay off the car until later? or go through with it now so that it might possibly increase my credit score? (i think right now my score is 740ish)
or you think it makes more sense for me to hold on to this, and wait until i purchase a house and see how my fiances are first?the way i justify paying the car off is that the car payment is way higher than the pmi (assuming it'll be below $300 on 550k apt with about 15% down).anyways, this is kind of an open question. just wanted to know what people thought. thanks!
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