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Contributor
somkey10
Posts: 75
Registered: ‎03-23-2010

Best course to take in prep. for Loan in late Spring

Will be house hunting come late spring , and would like to know what I should be doing to be in the best possible position, given my circumstances below.

I have 3 open TL's. They are the only TL's reporting on all 3 CRA


-2 CC's - both will hit the year mark in Feb 2011 ( balances kept below 5%). 1 with $100 CL, 1 with $750 CL

-36 mo. car loan (taken out in 6/09) at $277 a mo. I do not want this factored into my DTI. However, it is my oldest TL

What would be my best course of action before applying for a loan?

1. Pay off the car loan (I can) before the process?  And if so, risk lowering my Fico Score? ( remember this is my oldest TL & only installment loan, & will leave me with only 2 revolving TL's, both just over a year old at that time)

2.  Lets say I pay most of the car loan down and leave 6-3 months of payments, will this factor into my DTI? Basically, is there an instance where a LO won't factor an installment loan into my overall DTI, wherein there are only a few payments left? And if so, how many months left am I allowed?  ie; 6 mo, 3 mo, etc..

3. Given that I only have 3 TL's, should I app for a new CC at this time? If I get approved, which I think I will, it will be aged just over 6 months when I go to apply for a loan. Giving me 2 CC's over a year and 1 CC just over 6 months, plus padding my overall CL

Feel free to add any other scenarios

Thanks in advance!


6/09: 550's
MyFico Start date 3/10: EQ:632 - TU:655
2/11: EQ:678 - TU:707
5/11 EQ:715- TU:724


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Valued Contributor
IOBA
Posts: 2,653
Registered: ‎08-13-2009

Re: Best course to take in prep. for Loan in late Spring

I have 3 open TL's. They are the only TL's reporting on all 3 CRA

-2 CC's - both will hit the year mark in Feb 2011 ( balances kept below 5%). 1 with $100 CL, 1 with $750 CL  -- good to do, would advise against apply for more credit.

-36 mo. car loan (taken out in 6/09) at $277 a mo. I do not want this factored into my DTI. However, it is my oldest TL -- best to pay it off in full, before you apply for the loan.  That is the only way to avoid having it factored in -- if it doesn't exist.

What would be my best course of action before applying for a loan?

1. Pay off the car loan (I can) before the process?  And if so, risk lowering my Fico Score? ( remember this is my oldest TL & only installment loan, & will leave me with only 2 revolving TL's, both just over a year old at that time) -- YES!!!   It will still factor into your AAoA.   And a zero balance, zero payment is much better for getting a loan!

2.  Lets say I pay most of the car loan down and leave 6-3 months of payments, will this factor into my DTI? Basically, is there an instance where a LO won't factor an installment loan into my overall DTI, wherein there are only a few payments left? And if so, how many months left am I allowed?  ie; 6 mo, 3 mo, etc.. -- Pay it off.  :smileyhappy:  As long a payment is owed, they will factor it into your DTI.

3. Given that I only have 3 TL's, should I app for a new CC at this time? If I get approved, which I think I will, it will be aged just over 6 months when I go to apply for a loan. Giving me 2 CC's over a year and 1 CC just over 6 months, plus padding my overall CL  -- NOPE!  That will lower your score a little.  The lender doesn't want to see recent inquiries.

Contributor
somkey10
Posts: 75
Registered: ‎03-23-2010

Re: Best course to take in prep. for Loan in late Spring

good to know. Thank you!


6/09: 550's
MyFico Start date 3/10: EQ:632 - TU:655
2/11: EQ:678 - TU:707
5/11 EQ:715- TU:724


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Senior Contributor
mickie08
Posts: 3,299
Registered: ‎04-22-2008

Re: Best course to take in prep. for Loan in late Spring

 you have other tradelines in your name and that have perfect payment history such as utilities in your name?  If not, you will need that third active tradeline.

 

Personally, I would hold off paying off the car loan and keep the money in reserves.  Then you can have the LO tell the UW that if needed you can pay the car loan off at close or just prior to closing.  That will allow them to count the car as a current tradeline during underwriting (3 active tradelines over 1 year is the requirement) while having the flexibility to either pay off the car and drop the payment out of DTI at the last moment or leave it and keep the cash in reserves.  (you could then pay off the car whenever you felt you needed to in the latter case. 

 

This also avoids the score drop you will likely get in closing the car loan.  It will still factor into AAoA, but you will likely take a few points hit for closing the account and loss of credit mix. 

 

So, if you are trying to have the best possible scenario for approval:

 

Do not open any new accounts

keep paying the car and have the money for paying it off siting in reserves in your account with your down payment/closing costs)

Let the LO and UW know that if DTI becomes an issue that the loan could be paid off at close

 

 

Contributor
somkey10
Posts: 75
Registered: ‎03-23-2010

Re: Best course to take in prep. for Loan in late Spring

 


mickie08 wrote:

 you have other tradelines in your name and that have perfect payment history such as utilities in your name?  If not, you will need that third active tradeline. I thought that might be the case. Yes, I do have utilities in my name that will be 3 years old by May, with perfect payment history.  I also have rental history in my name as well with perfect payment history. These can be considered as TL's? I am single, no kids, and have no debt other than the car loan.

 

Personally, I would hold off paying off the car loan and keep the money in reserves.  Then you can have the LO tell the UW that if needed you can pay the car loan off at close or just prior to closing.  That will allow them to count the car as a current tradeline during underwriting (3 active tradelines over 1 year is the requirement) while having the flexibility to either pay off the car and drop the payment out of DTI at the last moment or leave it and keep the cash in reserves.  (you could then pay off the car whenever you felt you needed to in the latter case. 

 

This also avoids the score drop you will likely get in closing the car loan.  It will still factor into AAoA, but you will likely take a few points hit for closing the account and loss of credit mix. Yes, I thought my score would drop as well. 

 

So, if you are trying to have the best possible scenario for approval:

 

Do not open any new accounts

keep paying the car and have the money for paying it off siting in reserves in your account with your down payment/closing costs)

Let the LO and UW know that if DTI becomes an issue that the loan could be paid off at close Thanks.. sounds like good advice.

 

 


 


6/09: 550's
MyFico Start date 3/10: EQ:632 - TU:655
2/11: EQ:678 - TU:707
5/11 EQ:715- TU:724


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