help for my daughter who wants to buy a house

[MsKiwi]

My daughter is looking at a fabulous home that will qualify for as a USDA property. She has a question. I know you are not supposed to app for new credit but if she refinances her car for a lower interest rate lowering her car payment is that ok or a big fat no as well?

[GFer]

Is there a reason she can't do the refi after the home sale?

[MsKiwi]

she could wait, she was going to refi the car to make her payments substantially lower. Her fico's have raised quite a bit since she bought the car last summer (used car). I wasn't 100% sure if doing a refi on the car would be looked upon as new credit. I didn't want her to do anything until I asked the experts here. .

[GFer]

Couldn't hurt to ask a couple of different lenders their perspective on this. I actually opened a Macys card during the process of one of my contracts. LO said, that's okay, just don't open anymore! However I did get additional inquiries for having to open a checking account that wasn't with an 'online banking institution' just so I could have access to funds to get certified cashiers check for ernest $$ deposits!

He never said a word about it. (Maybe because this wasn't credit, though?)

[Anonymous]

The two main issues with new credit during the mortgage are:

DTI questions (will not matter if car payment will be lower)

Short term FICO drop (may matter if her FICO is close to any cutoff (within 30 points)

So, say she is going FHA and had a 630 FICO I would say no becasue the new loan might actually drop her score for a few months casuing problems even thought the new car loan makes the DTI better.  But, if she has say a 670, the new loan in very unlikely to drop here score 50 points and it should not be an issue unless there are other FICO issues or concerns. 

[DallasLoanGuy]

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@Anonymous wrote:

The two main issues with new credit during the mortgage are:

DTI questions (will not matter if car payment will be lower)

Short term FICO drop (may matter if her FICO is close to any cutoff (within 30 points)

So, say she is going FHA and had a 630 FICO I would say no becasue the new loan might actually drop her score for a few months casuing problems even thought the new car loan makes the DTI better.  But, if she has say a 670, the new loan in very unlikely to drop here score 50 points and it should not be an issue unless there are other FICO issues or concerns. 

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this is the CORRECT answer!!

Kudos to The Mickster 

 

[Anonymous]

lets say if it drop 30 points how long will we gain it back?

Thanks,

[rockymtngrl]

After opening a new account it typically will take about 6 month for your scores to rebound.

[MsKiwi]

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@Anonymous wrote:

The two main issues with new credit during the mortgage are:

DTI questions (will not matter if car payment will be lower)

Short term FICO drop (may matter if her FICO is close to any cutoff (within 30 points)

So, say she is going FHA and had a 630 FICO I would say no becasue the new loan might actually drop her score for a few months casuing problems even thought the new car loan makes the DTI better.  But, if she has say a 670, the new loan in very unlikely to drop here score 50 points and it should not be an issue unless there are other FICO issues or concerns. 

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Thank you she's very close to 700's on all cra (she was last month anyways)  The refi of the car isn't a deal breaker for her to be able to afford the home. She would just like to lower her payments on the car, it really would be a substantial savings to her.  I just didn't want her to screw up getting a home when she could wait if necessary.

There are no negs in her profile she is 22 so not a long history.

Message Edited by MsKiwi on 03-12-2009 12:41 PM

[Anonymous]

Is there any way she could do the car loan at the same time that she was closing the house? If she could time it right, she might be able to get the car refinanced using scores that haven't yet been dinged by the new home purchase.