Emergency spending prior to closing (CS 799)

joshall · ‎05-28-2015

First of all, we would like to thank all the fellow bloggers here who have provided exceptionally encouraging advice and constructive comments. We were able to raise our credit score from low 700's to low 800's within 4 months. Our median mortgage score is 799.

We are expected to close the house in July, but we currently need to splash 2k on an emergency (our car needs a new engine!). UGH

With this additional 2k spending, our credit card utility would increase from 7% to 9%:

20% on one Chase card;

10% on AE;

while 0% on other 6 cards

We know that this would lower our mortgage scores for sure. We could potentially pay this up, but we rather save 2k up in our checking as reserves for closing.

While we doubt our mortgage scores would drop to <760, we just want to make sure that this would not change the interest rates that we have been proposed for - we haven't locked our rate yet!

Would anyone please advise what to do? As far as we understand, one would get the best (single) rate of mortgage interest with mortgage scores of >760..

frugalQ · ‎05-29-2015

if it's going from 7% to 9% utilization, the point reduction may not be that big....as long as you are above 760, you will get the best rates. if you are still concerned, is there a way you can hold off on paying for the repairs until after your credit card statement date? that can possibly get you to July before the balance shows up....and it will not show up before closing.

whatever you do, please make sure to inform your LO because the new balance will surely increase your minimum payment and have some sort of impact on DTI

joshall · ‎05-29-2015

Dear frugal,

You are right on the DTI! Our front-end DTI is right at 36%, and back-end DTI is 37% (after paying the engine). I think we are good. What do you think?

We needed to get the engine paid up today so unfortunately there is no way around that.

We will talk to the LO next week. But we thought we will get advice here first before going to him. We don't want to raise any red flag at this minute - we have been so good with him- really good customer.

Revelate · ‎05-30-2015

@joshall wrote:
First of all, we would like to thank all the fellow bloggers here who have provided exceptionally encouraging advice and constructive comments. We were able to raise our credit score from low 700's to low 800's within 4 months. Our median mortgage score is 799.

We are expected to close the house in July, but we currently need to splash 2k on an emergency (our car needs a new engine!). UGH

With this additional 2k spending, our credit card utility would increase from 7% to 9%:

20% on one Chase card;
10% on AE;
while 0% on other 6 cards

We know that this would lower our mortgage scores for sure. We could potentially pay this up, but we rather save 2k up in our checking as reserves for closing.

While we doubt our mortgage scores would drop to <760, we just want to make sure that this would not change the interest rates that we have been proposed for - we haven't locked our rate yet!

Would anyone please advise what to do? As far as we understand, one would get the best (single) rate of mortgage interest with mortgage scores of >760..

You'll be fine in my opinion. 1 vs 2 cards won't matter, 20% is a non issue on a card, and 7 vs 9% is likely no difference aggregate. My dirty file I'd expect it to remain flat though your situation is a little different to be sure.

Do what you need to do, only issue I could think of is if the lender complained about seeing the change and asked for a LOE or whatever, which shouldn't be a big deal as this sounds like an easy explanation.

Wouldn't expect you'd drop much at all honestly even as you're one of the pretty credit people... and dropping 40 points on that? No chance in hell.

Anonymous · ‎05-31-2015

My scores are similar to yours. Sometime last year (fall, I think) I let my credit card report 36% (up from a usual of 6-8%) just to see what would happen, and my score only dropped 6 points. YMMV of course, but nothing radical happened, even at 36%.