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AAoA and mortgage questions

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Anonymous
Not applicable

AAoA and mortgage questions

I am in a situation where I want to apply for a mortgate in the next 12-24 months (after a good spree and gardening to let the inquiries go away). I have a bunch of old student loans/auto loans/ and a few CC's that are helping my AAoA be about 8.5 average years right now and the oldest being 20 years. somwhere in the 2019-2020 range all of those are going to drop off my reports (if i understand correctly closed/in good standing accounts drop off after 10 years). that is going to tank my AAoA to around 3 years average. How much will that affect my FICO?. And most importantly should i try and apply for a mortgae before those older accounts drop off and tank the AAoA? Will it make much of a difference to lenders to see a AAoA of 8.5 years+ as opposed to 3years?  Once my inquires drop off from the recent spree and I keep my utilization down, and the new accounts age, I should be around 800 on the FICO scores (before the old accounts drop off) Hope that all makes sense and any help would be appreciated. Thanks in advance. 

 

Current situation

FICO exp 775

FICO tu 789

 

annual income $39k

total CL $28,750 

utilization 3%

AAoA 8.5/oldest 20 years

3 REPLIES 3
StartingOver10
Moderator Emerita

Re: AAoA and mortgage questions


@Anonymous wrote:

I am in a situation where I want to apply for a mortgate in the next 12-24 months (after a good spree and gardening to let the inquiries go away). I have a bunch of old student loans/auto loans/ and a few CC's that are helping my AAoA be about 8.5 average years right now and the oldest being 20 years. somwhere in the 2019-2020 range all of those are going to drop off my reports (if i understand correctly closed/in good standing accounts drop off after 10 years). that is going to tank my AAoA to around 3 years average. How much will that affect my FICO?. And most importantly should i try and apply for a mortgae before those older accounts drop off and tank the AAoA? Will it make much of a difference to lenders to see a AAoA of 8.5 years+ as opposed to 3years?  Once my inquires drop off from the recent spree and I keep my utilization down, and the new accounts age, I should be around 800 on the FICO scores (before the old accounts drop off) Hope that all makes sense and any help would be appreciated. Thanks in advance. 

 

Current situation

FICO exp 775

FICO tu 789

 

annual income $39k

total CL $28,750 

utilization 3%

AAoA 8.5/oldest 20 years


Are the FICO scores you are quoting the mortgage scores or another FICO version (like FICO 8s)?

 

FICO mortgage scores use a different algorithum. See below from this thread: http://ficoforums.myfico.com/t5/Mortgage-Loans/FICO-scores-used-for-mortgage-and-where-to-obtain-them/td-p/3817869

The FICO scores used for mortgages

 

  • Equifax Beacon® 5.0

  • Experian®/Fair Isaac Risk Model V2SM

  • TransUnion FICO® Risk Score, Classic 04

These are sometimes listed on the tri-merge mortgage report as follows:

 

  • Equifax/FICO classic V5 FACTA
  • Experian/Fair Isaac (Ver. 2)
  • Transunion/FICO Classic (04)

Note: they have been commonly referred to on the myFICO forums and elsewhere as:

 

  • EQ 04 aka FICO 5 (on the myFICO report)
  • EX 98 aka FICO 2 (on the myFICO report)
  • TU 04 aka FICO 4 (on the myFICO report)

 

====================================================================================================

 

You don't need an 800 score to get the best rates.  For conventional loans you get the best interest rate at 740+ and the best PMI at 760+ with a reasonable down payment.

 

If you are going with an FHA or VA or USDA type loan you don't need anywhere close to those numbers - usually 640 and above gets you the same rate.

 

You seem to be ready now if your mortgage scores are anywhere close to your FICO 8 scores. They are usually different so it is worth checking your scores here first.

 

Depending upon where you are located, you may need to go with a FHA loans due to ratios if you are in a high property tax or high insurance premium type area. Maybe not if you are in an area of low taxes and low insurance. 

 

 

Message 2 of 4
Anonymous
Not applicable

Re: AAoA and mortgage questions

Those scores were both FICO 8 scores. Only reason I think I am not applying right now is my recent inquiries and new accounts. How much do inquiries affect a mortgage app? I have a rent agreement currently and it runs out 1/31/18 i am currently debating whethere to try and have a mortgage by then or whether to renew one more time and be in even better shape after that. 

 

The other thing i worry about is mentioned in OP. my current opened lines are only average about 10 months old oldest a little over 2 years. I have an AAoA though of 8.5 and oldest 20 years due to still reporting closed accounts. They are going to all drop off by 2019-2020 though. 

 

If I end up waiting will it hurt me if a apply after those old closed accounts drop off? 

Message 3 of 4
StartingOver10
Moderator Emerita

Re: AAoA and mortgage questions

Right now you are showing tradelines that have been paid and closed for close to 10 years.  Those lines are helping your score. 

 

If I were in your shoes, I would check your lease to see what the notification requirements are for the termination of your lease. I wouldn't renew for another term, IMO.

The interest rates may be higher next year and if your location is similar to my location, the prices will be higher. We have been experiencing large jumps in housing pricing. 

 

The metrics you are referring to are used in credit card type scoring for FICO 8s.  

 

Mortgage scores are used to qualify you for a mortgage and not FICO 8 scores. The algorium is slightly different so your mortgage scores may be different.  In my opinion the old accounts are greatly helping your scores and if you wait for them to drop off, your score will decrease (based on the info you provided). 

 

I don't know why you would want to renew your lease (potentially). It could hurt you in the long run with the lethal combo of higher housing prices + higher interest rate + lower scores (if your long standing closed accounts drop off).

 

Why speculate?  Get your mortgage scores here so you have an accurate idea of your current status.  Check your lease to see when you can start your homebuying journey.  If your scores are in the mid 700's you are good to go - assuming you have your funds in order.

 

 

 

 

Message 4 of 4
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