Personal loan included when applying for mortgage?

Anonymous · ‎07-02-2015

We are planning on builing our 1st home in November 2015. We have a personal loan that we will be paying off during the time of the build, will the the loan officer include this? Is there a certain time frame of loans being paid off that aren't included? Thanks

Anonymous · ‎07-02-2015

That happened to me. Two months before closing I had installment loan payout (the last of 48 payments.) I had no choice. Within 2 weeks my fico dropped 12-18 pts across all 3. Luckily I had enough room to take the hit. If your file is shaky, I'd pay it off now if I could and get it out of the way. It will help your DTI but hurt your score, and it might be up to individual mortgage company if the unpaid balance counts.

Anonymous · ‎07-03-2015

Thanks BamaGuy, maybe I'll pay it down and pay it off completely after we've closed.

Neebee · ‎07-06-2015

Mine was not included since there were less than 10 payments left.

Revelate · ‎07-06-2015

@Neebee wrote:
Mine was not included since there were less than 10 payments left.

How long ago was that? I'd been told Agency loans no longer allowed that as of this year give or take.

Regarding scoring, it depends what other loans are in your file right now; EQ/TU out of the mortgage trifecta will likely not move at all though might be a couple of points, EX 98 is affected though and that's the third score in the trifecta. If you can afford the hit to your DTI, don't pay it would be my recommendation.

FWIW my scoring changes while playing with installment loans:

725 -> 728, then a mortgage inquiry counted -> 722, then final installment loan updates -> 732 on EX Risk Model v2. Taking out that inquiry I might've gained 13 points on a mortgage score just by fiddling with my installment loan balances, and I'd lose that all if I paid them off. EQ / TU didn't move period during this period except for the inquiry counting.

My recommendation: pay it down to like 8-9% before you get your mortgage pull if you can afford it, then whack it after you close; this will hold if it's your only installment loan, if you have others all bets are off if they're still carrying substantial balances.

Neebee · ‎07-07-2015

I'm currently in the process. New construction. I will be closing in August. I was going to pay a loan off and my loan officer advised that it only needed to be paid down to where there were only 10 payments left.