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mortgage affecting your score

Valued Member

mortgage affecting your score

I was thinking of purchasing a home even though I am presently unemployed.  What kind of impact does it have on your score.  I have a 804 score.  I have one credit card with zero balance and a student loan with balance of less tha 600.

6 REPLIES
Moderator Emeritus

Re: mortgage affecting your score


doctor2be wrote:

I was thinking of purchasing a home even though I am presently unemployed.  What kind of impact does it have on your score.  I have a 804 score.  I have one credit card with zero balance and a student loan with balance of less tha 600.


In general, a mortgage has a net positive effect on scores over the long term.  There could be a small drop in score at first due to the new account reporting, but in my experience the effect is short-lived.

 

Qualifying for a mortgage with no income seems like a difficult thing to accomplish, and may not be a prudent move if affordability is going to be a concern.  As is clear from your situation, you don't need the mortgage to have a good FICO score.  Default on a mortgage would have long-lasting negative effects.

Community Leader
Epic Contributor

Re: mortgage affecting your score

Having a mortgage in one's credit portfolio is usually considered a positive with respect to credit scoring, being a low risk type of secured installment loan.

Risk of default on a mortgage is usually much lower than on other types of credit, in that most consumers will give priority to making the mortgage payment over other types of credit, such as CCs.  It is secured by the property.  It also improves you mix of credit.  And installment "utilization" (which is actually % of orig loan amount and not a util of available credit) is scored much lower than util on revoloving credit.  Since you already have at least one installment trade line, the improvement in credit mix might be lower than if it was your first installment loan.

On the negative side, it is mostly short-term.  CR inquires to secure the loan.  And upon reporting of the mortgage, you will get a reduction in your average age of accounts by adding a new trade line with zero age, but that is unavoidable.

Your score is high, so the normal point affects are harder to predict based on personal experiences, since most of us dont have scores in that realm.  FICO weighs things differently depending upon your individual scoring bracket

 

 

Valued Contributor

Re: mortgage affecting your score

You will not be able to qualify for any normal mortgage without current employment and you will need to prove a certain amount of employment history in that field. You will have to qualify to make that payment based upon your income.

 

There are really no exceptions in the current market. I have watched a person that had been making the payment on a house for 14 years fail to qualify to refinance even though his payment would go down. He had enough liquid assets to pay off the mortgage but his business was currently not making enough money to qualify for the payment. He had all 800+ FICOs and was only looking to refinance the current amount which was about 40% of current value.

 

There are mortgages available with about 50-60% down and interest in the 10% range. They don't report to credit reports.

 

 

Regular Contributor

Re: mortgage affecting your score


doctor2be wrote:

I was thinking of purchasing a home even though I am presently unemployed.  What kind of impact does it have on your score.  I have a 804 score.  I have one credit card with zero balance and a student loan with balance of less tha 600.


Just responding to your specific question on impact of a mortgage (presumably) on your score:  My scores are similar to yours, and you can see the relatively minimal impact a new (refinanced) mortgage had in my case from the scores in my siggy below (which I suppose I should update one of these days!).


Starting Score: EQ 804 - (April 2009)
Upgraded thanks to FICO Forums: EQ 813 / EX 842 / TU 823 - (FICO scores from mortgage lenders, June 2010)
Recent Scores: EQ 807 / TU 799 - (March 2012)
Goal: Survive Another Day
Take the FICO Fitness Challenge
Frequent Contributor

Re: mortgage affecting your score


Lel wrote:

doctor2be wrote:

I was thinking of purchasing a home even though I am presently unemployed.  What kind of impact does it have on your score.  I have a 804 score.  I have one credit card with zero balance and a student loan with balance of less tha 600.


In general, a mortgage has a net positive effect on scores over the long term.  There could be a small drop in score at first due to the new account reporting, but in my experience the effect is short-lived.

 

Qualifying for a mortgage with no income seems like a difficult thing to accomplish, and may not be a prudent move if affordability is going to be a concern.  As is clear from your situation, you don't need the mortgage to have a good FICO score.  Default on a mortgage would have long-lasting negative effects.


+1

TU Auto enhanced FICO (9/2012): 744
EX FICO (8/2012): 748
EX FICO (6/2010): 739
Super Contributor

Re: mortgage affecting your score

Don't be FICO score poor.  If buying a home will improve the quality of life for you and your family or the purchase is a great deal, then I would buy the home regardless if the effect on your FICO score.  Whether you should buy now or this particular home is a non-FICO issue.

10/17/2017 FICO: EQ 829 TU 830 EX 826