topic Re: Auto Refinance Smart? in Understanding FICO® Scoring

Auto Refinance Smart?

EyesofTexas — Tue, 13 Nov 2012 01:45:47 GMT

I am currently saving for a house and recently finally cracked the 700 barrier, 707 to be exact. I have only my truck as debt which is 14,000. I have had perfect payment history since I opened it back in Feb. 2009. My payment is 542/month.

I recently opened a checking and savings account with a credit union who pulled my credit as a part of their decision whether or not I could open the account. Once they pulled my credit info they offered me a better interest rate and lower monthly payment. Its great news but I am concerned that opening a new account with my credit union will affect my credit score negatively.

I plan on buying a house in April, but do not want to make any mistakes leading up to that can have dire consequences on my credit score.

So to sum it all up, is a auto refinance smart when Im considering buying a house within 6 months?

Re: Auto Refinance Smart?

Shogun — Tue, 13 Nov 2012 04:49:18 GMT

If your score can handle it, yes, and this is why. The lower payments will help your DTI, the lower interest rates will help your checkbook. It's not a new account, it's a refinance. If it gets flagged in UW, you would just have to explain this.

Re: Auto Refinance Smart?

EyesofTexas — Tue, 13 Nov 2012 04:55:13 GMT

Ok that's great news. One more question. What are you referring to when you say flagged by UW?

Re: Auto Refinance Smart?

ccnewcc — Tue, 13 Nov 2012 05:07:26 GMT

Shogun wrote:
If your score can handle it, yes, and this is why. The lower payments will help your DTI, the lower interest rates will help your checkbook. It's not a new account, it's a refinance. If it gets flagged in UW, you would just have to explain this.

The Refiance of OPs Auto Loan WILL be a new TL.

Re: Auto Refinance Smart?

ccnewcc — Tue, 13 Nov 2012 05:22:30 GMT

EyesofTexas wrote:
I am currently saving for a house and recently finally cracked the 700 barrier, 707 to be exact. I have only my truck as debt which is 14,000. I have had perfect payment history since I opened it back in Feb. 2009. My payment is 542/month.

I recently opened a checking and savings account with a credit union who pulled my credit as a part of their decision whether or not I could open the account. Once they pulled my credit info they offered me a better interest rate and lower monthly payment. Its great news but I am concerned that opening a new account with my credit union will affect my credit score negatively.

I plan on buying a house in April, but do not want to make any mistakes leading up to that can have dire consequences on my credit score.

So to sum it all up, is a auto refinance smart when Im considering buying a house within 6 months?

DTI ratio with a Refi might help, however, you might wanna think about the terms and how long the Refi will be. You already had the loan for 45 months and with a Refi you might turn your Truck upside down by extending the life of the Loan(s).

You are thinking about getting mortgage shopping in 6 months. I assume you have a nice down payment for closing costs etc ready? To improve your DTI ratio, couldn't you use some of that down payment now to pay down the principle of your Truck and continue to save for your down payment in the next 6 months?

It is not usually advisable to be getting inquires and new credit soo close to mortgage shopping.

Re: Auto Refinance Smart?

bettercreditguy1 — Tue, 13 Nov 2012 12:23:23 GMT

You have not said what the remaing months, the payment, year or condition is on your truck. +1 to the above refi response. Bottom line what is your objective? Are you too tight on cash flow with all of the payments? Then you would be prudent to reduce your current debt and save some more money towards a rainy day fund and your downpayment. YMMV., just a suggestion.

Re: Auto Refinance Smart?

Shogun — Tue, 13 Nov 2012 13:24:38 GMT

ccnewcc wrote:
Shogun wrote:
If your score can handle it, yes, and this is why. The lower payments will help your DTI, the lower interest rates will help your checkbook. It's not a new account, it's a refinance. If it gets flagged in UW, you would just have to explain this.
The Refiance of OPs Auto Loan WILL be a new TL.

It will be a new TL, but it will not be taking on new debt. Like I said before, it would just be a letter of explanation should the UW question it.

Re: Auto Refinance Smart?

EyesofTexas — Tue, 13 Nov 2012 17:37:50 GMT

It was a 72 month loan on a 2009 Tahoe that I bought brand new. The condition of my truck is great. I have a little over 50k miles on it. The reason I'm considering the refinance is it will lower monthly payment. I'm fine with the payments now but with lower monthly payments I could save more monthly and put it towards down payment. I'm worried about making an inquiry so close to going through mortgage process. Hopefully this helps clear up some things and you guys can come to a common agreement. But thank you for all the info.