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Pay off car loan before mortgage application?

New Contributor

Pay off car loan before mortgage application?

Hello,
 
My wife and I are saving and budgeting this year with a goal of home ownership by this time next year.  My FICO score is 802 and hers is 766.  We both have good incomes.  $0 CC balances.
 
She's paying off a college loan and a car loan, and I've got a car loan.  My payoff is $6k, and I'm paying $400 monthly at 0% interest.  By the time we're looking at mortgages, I'll have paid all but about $2k-$3k. 
 
Should I just pay off the loan, or save that money for a down payment and closing costs?   Housing prices are quite high here, so we'll probably have enough for 10% down by the end of the year.  
 
I'm just wondering if it would be better to show less debt or monthly payments, more cash on hand, or if it will really matter with a low payoff amount.
 
Thoughts are appreciated.
 
THANKS!  


Message Edited by FICOScott on 05-09-2008 06:25 PM

Message Edited by FICOScott on 05-09-2008 06:34 PM
Message 1 of 5
4 REPLIES
Super Contributor

Re: Pay off car loan before mortgage application?

i would rather see you with some liquid assets or reserves..... unless your debt ratio is too high, then I would have to advise you to pay off debt.
i dont care what you owe.... i care what the payment it.
 
Retired Lender
Message 2 of 5
Valued Contributor

Re: Pay off car loan before mortgage application?

Pay it down to less than 10 payments remaining then it won't count against your DTI and you will have the extra cash and not lose the couple of points that you would lose if you lost the good mix of credit.
Mortgage Lenders Mid-Score 778 I AM A HOMEOWNER!!!!! 30 Year 5% Fixed Rate, closed on 3/18/09
Message 3 of 5
New Contributor

Re: Pay off car loan before mortgage application?

Thanks. 
 
It looks like I have 14 payments remaining - and we won't be doing anything for 6 months or so, so if that 10 months rule applies, I should be OK.
 
Thanks again.
 
Message 4 of 5
Super Contributor

Re: Pay off car loan before mortgage application?



1111mel wrote:
Pay it down to less than 10 payments remaining then it won't count against your DTI and you will have the extra cash and not lose the couple of points that you would lose if you lost the good mix of credit.


if it is more than $100(significant) then it is still used on fha
 
Retired Lender
Message 5 of 5