Personal Loan to Consolidat​e Debt before Home Purchase

[Anonymous]

Moved this from the General Topic Section. My fiance and I are planning on purchasing a home next summer. We both have FICO scores in the 700-720 range. We were looking into consolidating our debt with personal loans. We would only do this if we were able to find a lower interest rate than what we currently have on our cards. I am confident that once the cards are paid off we would be able to put them away (it is rare that we even use them now), but unfortunately we used them too much years ago. Neither of us ever miss payments and even if we dont use the personal loan paying more than the minimum is not an issue. We just thought it would be easier to have the payments consolidated. Long story short, would taking out a loan like this be detrimental to our scores when we are going to attempt to get a mortgage in the summer? We actually looked this past summer and we pre-approved for a morthahe then. Thanks for everyones help! ....

[marty56]

Welcome to the forum.  MOst of the time, opening a new account will create a score hit.  There could be an hit for the INQ, the new account, or possible change in your AAoa.  While your DTI won't change, your FICO score could go down enough to affect your interest rate and possible even approval.  I would wait till after you close to do the consolidation. 

You could probably find better advice in the mortgage section of this forum.

[ShanetheMortgageMan]

If you are going for conventional mortgage financing, then unless the interest savings will be substantial, I agree with marty and would recommend you put this off until after you buy the home.  Conventional mortgage products interest rates are very score sensitive.

If you are going for FHA, VA or USDA financing then a 680 score gets the same rates as a 720 score, so it would probably be OK for that situation.

[Anonymous]

Will I have trouble getting a personal loan after taking out a mortgage?

[ShanetheMortgageMan]

I'm not an expert on personal loans, but from what I've seen credit score & the amount of the loan are the two biggest items that impact the terms of the loan.  Applying/getting a mortgage would impact your credit similarly to applying/getting a personal loan.  Your mortgage amount will be a lot bigger than your personal loan amount, so if you are going to impair your credit for one... I'd recommend you get the mortgage first.