Debt Consolidation: Step-by-Step Guide

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Seize the opportunity to show high-debt clients how to consolidate their balances with a new mortgage and potentially save money each month to apply towards their principal and accelerate mortgage payoff (even with a higher-rate mortgage).


Choosing Refinance or Move Up Purchase

When using the Debt Consolidation tool, you have two options for your type of loan: Refinance or Move Up Purchase. To get started with either option, follow the steps below:

  1. Using the toggle bar, choose either Refinance or Move Up Purchase

  1. Enter the client’s Name and their Monthly Qualifying Income.

From here, begin entering the debts your client would like to consolidate. You can add up to 15 different debts. The information required includes the name, type of debt (Installment, Revolving, or Other), the total balance, and the monthly payment associated with the debt.

  1. Click Next.

You can review the steps for each option under the Refinance or Move-Up Purchase in the sections below.


Refinance: Step-by-Step

  1. Enter your client’s existing property information under Existing Property. This includes:
    • Location (address, city, county, or zip code)
    • Original purchase price
    • Annual property tax in dollars or percent
    • Monthly home insurance
    • Association fees
    • Purchase year and month
    • Estimated home value
      • Note: Annual property tax, monthly home insurance and estimated home value will automatically be calculated, but these fields can be edited.
  2. Next, enter details about the existing home loan.
    • Select if your client has refinanced in the past. 
      • If yes, you will need to select the refinance year and month from the dropdowns. 
    • Enter the loan amount, term, loan program and type, rate and monthly mortgage insurance.
      • For help calculating the Monthly Mortgage Insurance, click Use worksheet
    • The estimated remaining balance and monthly payment will automatically populate, but these can be edited. 
  3. The Total Equity will be calculated at the bottom of the page. Click Next

Next, enter the loan refinance terms and information.

  1. The max Front Ratio and Back Ratio will be automatically generated. These fields are editable.
  2. The target LTV will default to 75%, and the target loan amount will be calculated automatically. These two fields can be edited, and a change to one of these values will cause the other value to be recalculated.
  3. Enter the loan’s term, program, type, interest rate, and any points being purchased.
  4. Mortgage insurance will be automatically generated depending on your inputs, but you can also utilize a worksheet or edit this field. Depending on the type of loan, an editable field for upfront MIP, Guarantee Fee, or Funding Fee will appear. You can choose to Finance this fee and add it to the loan amount by clicking this checkbox:
  5. Enter any prepaid and escrow funds. 
  6. Finally, enter all closing costs. You can utilize a worksheet for this that you have previously created.
  7. The available cash before debts will be calculated at the bottom of the page. Click Next.

You will now be able to apply debts and obligations to the available cash in-hand. Click here to learn what's inside the Debt Consolidation Refinance Report. 


Move-Up Purchase: Step-by-Step

  1. Enter your client’s existing property information under Existing Property. This includes:
    • Property address
    • Original purchase price
    • Annual property tax
    • Monthly home insurance
    • Association fees
    • Purchase year and month
    • Estimated home value
    • Cost to sell (real estate agent fees)
      • Note: The annual property tax, monthly home insurance, and estimated home value will automatically be calculated, but fields can be edited. 
  2. Enter your client’s existing loan information under Existing Loan
  3. Select if your client has refinanced in the past. 
    • If yes, select the refinance year and month from the dropdowns. 
    • Enter the loan amount, term, loan program and loan type, rate, and monthly mortgage insurance (for help calculating the Monthly Mortgage Insurance, click Use worksheet)
    • The estimated remaining balance and monthly payment will automatically populate, but these can be edited.
  4. Available cash will automatically calculate at the bottom.
  5. Click Next.
  6. Enter the max front and back ratios and the information for the property your client plans on purchasing. 
  7. Enter the property location, name, price, annual property tax, and monthly home insurance and association fees
    • The annual property tax and monthly home insurance will automatically be calculated, but this can be edited. 
  8. Enter the Loan information including:
    • Down payment
    • Term
    • Loan program
    • Type
    • Rate
    • Points
    • Monthly mortgage insurance (for help calculating the Monthly Mortgage Insurance, click Use worksheet).
    • If the loan is self-insured, check off the box. Checking this off will make sure the MI is not dynamically calculated.
    • Prepaid & Escrow costs
    • Closing costs (for help calculating the Monthly Mortgage Insurance, click Use worksheet).
  9. Available cash to apply towards debts will automatically calculate at the bottom.
  10. Click Next.

You will now be able to apply debts and obligations to the available cash in-hand and view the report. Click here to see what's inside the Debt Consolidation Move-up Report. 

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