Will a CLI hurt pending Mortgage Pre-Approval?

[Anonymous]

I'd love any advice!

* First question - will a CLI with a soft pull hurt a credit score in any way when you're in the middle of getting pre-approved/qualified for a mortgage?  My boyfriend currently has 4 inquiries on each of his reports.  

* Second question - if your utilization is currently at 11%, and said CLI could possibly lower that - would that help in any way with said pre-approval?

My boyfriend is trying to get pre-approved/qualified to buy his first home, but was told he should pay off a $3800 auto loan first.  We're trying to avoid that if possible since the monthly payments are only $98 a month with a great interest rate - so I was curious if lowering his utilization at all might help with that, or if transferring the debt to an existing card might be an option.  

His current cards are:  Cap1 with a 10k limit ($600 balance), Chase Freedom with a 10k limit (2.5k balance on it) and an Amex with 6k ($0 balance) that he wants to raise to 10k or more.

Thank you!

[Anonymous]

If all the documentation has already been submitted and the file has already had a credit report pulled, then changes in the credit profile will not make a difference unless a new credit report is used. Soft pulls don't affect score so that's something you shouldn't worry about and they don't count as inquiries.

[Anonymous]

No documentation has been supplied at all yet - I think the lender just gave his credit profile a lookover and gave him suggestions as to what he'd need to do to reach the mortgage goal he's looking for.

[Revelate]

Mortgage > credit cards.

Might get a small bump but he'd probably get a better one by just kicking $600 to Cap 1 and paying off that balance.  

Amex is 99.99% SP, but there have been cases of a HP.  Not saying it applies to his situation, but it could happen however rare... admittedly it was like 3 times in 2 years when I was hardcore reading the CC forums heh.

Paying off an auto loan never helped anyone's score, at all, in pretty much the last 2 decades and maybe longer.  Paying *down* the auto loan would help EX Risk Model v2 which is part of the mortgage trifecta, but that money would be better spend getting those revolving balances down financially in addition to credit wise.  Unless it helps clear a DTI hurdle, never ever pay off an installment loan... one of the times one should simply tell the LO no.

What was the BF's score if the LO looked at his credit?

[StartingOver10]

OP, it is hard to tell from your post why the LO said what he did about paying off the auto loan.

If could be that he needs that payment to go away for DTI reasons.  So what is your bf's current gross annual income? What type of income is it (W-2, 1099, hourly, commission, etc)?  What is his mortgage mid score?  If you don't know that info, you(he)  can pull a 3 b report here and see his mid score

Where did he go to speak to a LO?  Did he see someone at a big box bank?  Or a CU?  Or did he see a mortgage broker or a mortgage banker?  These are all different resources for a mortgage and the guidelines (overlays) for banks and CU's are more strict than they are for a company that does nothing but mortgages (normally).  The overlays are a lender choice. So the lender you choose may have more restrictive guidelines than another one.

Where he chooses to go can affect your bf's maximum allowed DTI tremendously.  

Also the loan type makes a big difference.  

Paying off the auto loan may have been suggested so that your bf qualifies for the amount of mortgage he asked about - but what Rev said is true. At the time of payoff it could drop his score. So please let us know the above info and we might be able to give some suggestions to retain the score. It may be as simple as using another lender and not paying off the auto loan. OR paying off the auto loan and getting points from another source. OR something else.  

One of the things your bf would want to make sure is that the LO he uses is experienced and knowledgeable.  It makes a big difference in the entire loan process. 

[Anonymous]

Thank you guys so much!

I'm not totally sure what his credit score is, though the LO told him it was excellent.  He makes around 60k a year, salary/full time, and has zero baddies.  I do think it has a lot to do with him trying to get approved for a certain amount - 250k.  We can go lower and planned to, but wanted breathing room to shop around with if it was possible.

He was talking to a LO through a bank that his realtor (family friend) recommended - I'll see if I can prod him to try a different lender to see if he might get a different response.  I think most pulls will be lumped together for 14 days so it shouldn't hurt his credit too much to shop around?  

If anything, to me it would make more sense to pay off a credit card than the auto loan - but the credit card has 15 more months of 0% financing, and the car loan is similar.  The payments are easy for us to manage, so we'd rather keep them if possible so we could use our otherwise available funds towards moving costs/etc.  

[DallasLoanGuy]

you will likely get the same response from lender #2

but hopefully lender #2 can explain the ins/outs better and the 'why' behind they want you to pay something off

[Anonymous]

I hope so too.  

Mostly we were just curious if upping his existing credit limit might help even out some ratio - but I guess that wouldn't matter in the case of an income vs debt ratio.  

At least it is good debt!