Refinance and purchase of new - impact on score

[Anonymous]

Hi - my score is 726.

I am plannint to refinance my current property and also buy a new poperty in 3 months time.

My existing property 5/1 arm is expiring next month, hence refinance and consolidation of my HELOC is kind of important. I am getting a good refinance rate for another 30 year loan for my original mortgage amount (no additional cash out though).

Original Mortgage: $272,000

Mortgage 1 outstanding - $208,000 (20 yrs. remaining)

Heloc - $62,000

Refinance planned: $270,000 for next 30 years.

In 3 months, I will be taking a new mortgage for $280,000 for purchase of new home.

Should I refinance first or wait till new mortgage is taken? I understand refinance will hurt my credit, but will it be too high am impact? Please let me know your opinion.

[GFer]

I'm interested in the answer to this too!  I wonder if you would get a better answer in the mortgage forum?

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[Anonymous]

Tough to say because I'm not sure how a HELOC affects "credit card" utilization scoring.

First, you are getting rid of a well seasoned mortgage at 76.4% installment utilization and replacing it with a non-seasoned mortgage at 100% installment utilization.  This will probably ding your scores -- FICO 8 and FICO mortgage scores both.

Getting rid of that HELOC may help, though.  Back in 2008 or so, FICO decided to STOP counting big HELOCs in credit card utilization, but I am not sure how it affects the older FICO mortgage scores.  I bet it has no effect either way on FICO 08 scores.

So I would guess you get dinged on FICO 8 and FICO mortgage scores for replacing the mortgage with a new one, but how much is anybody's guess.  Might be as little as 5-10 points, might be as much as 15-20 points.

[Revelate]

HELOC only affects EX FICO 2 as far as mortgage scores go.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/All-revolvers-zero-testing-HELOC-Amex-cha...

Also FICO 8 is irrelevant for mortgages... EX FICO 2 again is the only one that seems to count installment utilization at all, so if you lower your DTI refinance first.  Also that may avoid some awkward questions regarding the type of mortgage you're getting, though you might get them anyway (investment property).