topic Re: Refinancing a personal loan before mortgage app? in Mortgage Loans

Refinancing a personal loan before mortgage app?

ebokee — Sat, 21 Feb 2015 16:18:57 GMT

I took out a personal loan with onemainfinancial early last year and recently recieved a call from them about refinancing it. They told me that it would include a credit inquiry and that I could use any extra money for closing costs. Anyone have any knowledge about this sort of thing? I plan on applying for the mortgage around Oct or November of this year. Will it hurt my mortgage chances if I did this?

Re: Refinancing a personal loan before mortgage app?

StartingOver10 — Sat, 21 Feb 2015 18:42:04 GMT

@ebokee wrote:
I took out a personal loan with onemainfinancial early last year and recently recieved a call from them about refinancing it. They told me that it would include a credit inquiry and that I could use any extra money for closing costs. Anyone have any knowledge about this sort of thing? I plan on applying for the mortgage around Oct or November of this year. Will it hurt my mortgage chances if I did this?

Not a good idea. You have much better choices for closing costs than One Main Financial. You can get a seller concession for up to 3% of purchase price on a conventional loan and up to 6% on a FHA loan.

Or have the lender pay a portion of your closing costs. The lender will have to bump the rate a bit but it is much, much better than what One Main offers in terms of rate and overall terms of the loan.

If you have the ability to get a gift from a relative, that is an option or lastly, borrow from your 401k if you can (but consider this last).

Re: Refinancing a personal loan before mortgage app?

ebokee — Sat, 21 Feb 2015 18:45:44 GMT

Thanks but do you think that I should refinance my loan with them at least so that my payments will be lower? Do you think that the inquiry would hurt my chances?

Re: Refinancing a personal loan before mortgage app?

StartingOver10 — Sat, 21 Feb 2015 18:56:34 GMT

What is the current rate on this loan and your current payment and balance?

Re: Refinancing a personal loan before mortgage app?

Anonymous — Sat, 21 Feb 2015 19:18:52 GMT

How much longer do you have on your current payment term? IMHO, I'd rather deal with higher payments for a short time than smaller payments and double the term especially if you're considering buying a home. You could always get the seller and lender to pay most, if not all closing costs.

Re: Refinancing a personal loan before mortgage app?

ebokee — Sat, 21 Feb 2015 19:20:38 GMT

Off the top of my head I cannot give the exact rate right now but I'm sure that you know it's up there since it Onemain after all. The loan is now about a little over $7000. Payments are $235 a month. Do you think it will be worth it it to refinance it at my local credit union instead of onemainfinacial? I planned on paying the whole thing off by the end of the year before I applied for the mortgage anyway. It was just the call that I recieved from Onemain yeasterday that me to thinking about all of this.

Re: Refinancing a personal loan before mortgage app?

ebokee — Sat, 21 Feb 2015 19:22:32 GMT

I've only had the loan 1 year.

Re: Refinancing a personal loan before mortgage app?

Anonymous — Sat, 21 Feb 2015 19:23:02 GMT

I haven't had any dealings with Onemain personally but have heard their rates can be brutal. The credit union is always a great choice!

Re: Refinancing a personal loan before mortgage app?

Anonymous — Sat, 21 Feb 2015 19:26:29 GMT

IMO I'd refinance elsewhere or pay it off if I had the funds. If your plan is to purchase a home by the end of the year, you can always save that $235 each month until closing.

Re: Refinancing a personal loan before mortgage app?

ebokee — Sat, 21 Feb 2015 19:48:41 GMT

Would it hurt me to get the inquiry to refinance? I already have a few credit card inquiries from December.

Re: Refinancing a personal loan before mortgage app?

Anonymous — Sat, 21 Feb 2015 22:17:50 GMT

I've always been told that as long as you don't apply for new credit within 6 months of applying for a home loan, you're good. I will be testing that philosophy soon. I got a new CC in December and will be applying for a home loan in a couple months!

Re: Refinancing a personal loan before mortgage app?

Anonymous — Sat, 21 Feb 2015 22:41:27 GMT

@Anonymous wrote:
I've always been told that as long as you don't apply for new credit within 6 months of applying for a home loan, you're good. I will be testing that philosophy soon. I got a new CC in December and will be applying for a home loan in a couple months!

I think that depends. I was told to go out and secure a couple more credit cards because my file had little to no revolving credit activity. Only 2 tradelines in that catergory and the cards had been mostly dormant for years. That scenario was hurting my score. I applied for mortgage in Nov, approved, but they came back with, "if we can get your score up 30pts you can get our best APR" In Dec I picked the chase freedom and 2 weeks ago the AARP. A recent HP had us withing 3 pts, so the strategy worked.

Re: Refinancing a personal loan before mortgage app?

Revelate — Sun, 22 Feb 2015 13:01:41 GMT

@Anonymous wrote:
@Anonymous wrote:
I've always been told that as long as you don't apply for new credit within 6 months of applying for a home loan, you're good. I will be testing that philosophy soon. I got a new CC in December and will be applying for a home loan in a couple months!
I think that depends. I was told to go out and secure a couple more credit cards because my file had little to no revolving credit activity. Only 2 tradelines in that catergory and the cards had been mostly dormant for years. That scenario was hurting my score. I applied for mortgage in Nov, approved, but they came back with, "if we can get your score up 30pts you can get our best APR" In Dec I picked the chase freedom and 2 weeks ago the AARP. A recent HP had us withing 3 pts, so the strategy worked.

Only for thin files.

That advice doesn't apply to anyone else TBH.

That said, inquiries mean very little: new accounts may need a LOE but seriously one doesn't have to be a credit prude though it'll make for more hassle in the mortgage process; however, if the refinance would save money, that's a smart financial decision and should be trivial to explain especially if it helps you clear the DTI hurdle or save for a downpayment. Getting an unnecessary credit card though makes less than zero sense, at least a loan refinance may help your file rather than be net zero or worse from a mortgage underwriting perspective.

@OP - see about refinancing elsewhere if your scores support it, One Main plays between the deep subprime and prime credit stratas and their APR's are high in the current market if you have a decent file... they'd be way high even with my file which ain't pristine.