I was speaking with a Nashville mortgage client the other day about her application.  She had found her dream home and was heartbroken to learn that, based on her income and debts, she could only qualify for a $110,000 loan based on her down payment.  Her dream home was $125,000 and there was no way she could make up the difference with cash to close.  As we delved into her credit report a little more, I found out her car loan payment of $320 was based on a rate of 9.75%, which seemed quite high for someone with her credit scores of 700+.   I encouraged her to call a couple of places to see about refinancing the car because if she could free up just a little cash flow, it could make a big difference as to how much home she could qualify for.  As it turned out, she found a bank who could drop her payment by about $100/mo on the car loan.  Even though this new loan stretched out the term 24 more months than what she owed on the original loan, she makes enough extra money from her side job (that couldn’t be counted for loan qualification purposes) that she could still manage to pay the loan off in the original timeframe by paying extra. 

So what happened?  Well, with her $100/mo lower car payment, it translated into an additional $17k that she could borrow and keep her debt to income ratios within loan guidelines!  This got her preapproval amount raised to a little more than she needed.  She’s under contract now and is  going to be able to get her dream home after all.  It’s times like these that remind me why I am in this business… and also why we should not forget to consider every angle.

Stay tuned for more mortgage tips in my Nashville Mortgage series…