topic Re: Payoff debt,mortgage scores in Mortgage Loans

Payoff debt,mortgage scores

rileydude — Wed, 13 Sep 2023 16:48:26 GMT

Good morning all,

I have a couple questions and would hope some of you could chine in and give me a good idea what to do...looking to apply for a mortgage in about 9 months from now...reason being is my lease will be up in January 2025

So..I have been paying off alot of debt the last couple years and I should be left with 3 cc, a personal and an auto loan.

My personal is $495/month, but the payoff date is in December of 2024..so about three months before I apply for the mortgage ..will it count against my DTI at that point?

Auto loan is $230/ month..I won't touch it and just let it run, balance at that point will be around $9000.

Soo..the CCs

I am gonna have a Discover with about $6300/ /$17200 in September next year.

NFCU with $10300/$24000

And a USAA card with a balance of $5900, this card was closed by USAA during covid..it's reporting paid as agreed, credit limit $15900 and closed by creditor...i do not know if this card is reported as maxed out.

I will have about $7000 to either pay off the Discover or the USAA..would Discover be better to being down overall utilization or the USAA..amd again would the 3 reaming payments on my personal loan would count against my DTI?

my current morgen Fico is

719, 712, 709...really hope I could and should be above 760 by the time I apply.

Thanks for any input.

Re: Payoff debt,mortgage scores

VAMortgageGuy — Wed, 13 Sep 2023 17:12:28 GMT

@rileydude wrote:
Good morning all,
I have a couple questions and would hope some of you could chine in and give me a good idea what to do...looking to apply for a mortgage in about 9 months from now...reason being is my lease will be up in January 2025
So..I have been paying off alot of debt the last couple years and I should be left with 3 cc, a personal and an auto loan.
My personal is $495/month, but the payoff date is in December of 2024..so about three months before I apply for the mortgage ..will it count against my DTI at that point?
Auto loan is $230/ month..I won't touch it and just let it run, balance at that point will be around $9000.
Soo..the CCs
I am gonna have a Discover with about $6300/ /$17200 in September next year.
NFCU with $10300/$24000
And a USAA card with a balance of $5900, this card was closed by USAA during covid..it's reporting paid as agreed, credit limit $15900 and closed by creditor...i do not know if this card is reported as maxed out.
I will have about $7000 to either pay off the Discover or the USAA..would Discover be better to being down overall utilization or the USAA..amd again would the 3 reaming payments on my personal loan would count against my DTI?
my current morgen Fico is
719, 712, 709...really hope I could and should be above 760 by the time I apply.
Thanks for any input.

No, if the personal loan is paid and closed, it will not be counted in your debt ratios.

I would pay off the USAA card. In my experience, closed ccs have a negative effect on your scores. You can always have a lender run a what if scenario to see which option will give you the best outcome.

Re: Payoff debt,mortgage scores

rileydude — Wed, 13 Sep 2023 17:21:04 GMT

Thank you VaMortgageguy,

Just want to clarify, three loan would have three remaining payments left when I apply for the mortgage... I was also thinking the USAA..

Re: Payoff debt,mortgage scores

VAMortgageGuy — Wed, 13 Sep 2023 17:30:26 GMT

@rileydude wrote:
Thank you VaMortgageguy,
Just want to clarify, three loan would have three remaining payments left when I apply for the mortgage... I was also thinking the USAA..

As an LO, I would exclude the payment because I know the loan will be paid off before your file hits an underwriters desk.

Re: Payoff debt,mortgage scores

rileydude — Wed, 13 Sep 2023 17:32:57 GMT

Thank you..

Re: Payoff debt,mortgage scores

VAMortgageGuy — Thu, 14 Sep 2023 15:10:45 GMT

Any time.

Re: Payoff debt,mortgage scores

Meach7 — Fri, 15 Sep 2023 02:11:14 GMT

Check with your lender. We wouldn't include installments if they were to be paid off in 10 months or less.

Re: Payoff debt,mortgage scores

rileydude — Fri, 15 Sep 2023 12:40:15 GMT

Thank you, good info. I don't have a lender yet, but I think I will go with either my house Credit Union, USAA or NFCU. I have been following Jennifer Beeston on Youtube..who works for Guaranteed Rate, she gives some good advice but i have never heard of them before.

Re: Payoff debt,mortgage scores

MeredithLepore — Tue, 19 Sep 2023 07:02:48 GMT

It seems like you have a solid plan to pay off your debt, which is great. Keep knocking them off one-by-one. Is there any way you can increase your income in the next year to put an even bigger dent in your cc's? The more debt you can get rid of before you take on a mortgage payment (and all the expenses that come with moving and owning a home) the better.

Re: Payoff debt,mortgage scores

CreditBob — Tue, 26 Sep 2023 19:52:54 GMT

The link below will help you understand. John worked at both FICO & Equifax credit bureaus. This is called, the Anatomy of an 850 credit score. The one thing that I will tell you is to have a total of no more than three accounts with balances. That includes both installment & revolving trade lines. As far as installment accounts go, the best way to maximize points in the debt category, is to have one open installment account with a very small balance, even if it is only $ 200. Once all installment loans are paid & closed, you will not get scored or get points for having a credit mix or diversified credit profile. You are probably aware of the pie chart with five different areas that make up the score. In each of those areas are multiple metrics that make up those areas. I am sending you two links that I believe will help you out. On revolving accounts that are closed & have a balance, please make sure that you continue making your payments on time. And if you are not sure of the balance on any credit card or account, contact the lender as well as pull a credit report to verify. Installment debt is not treated the same as revolving debt when it comes to utilization. You want your loan balance to be as low as possible but still left open if you can so that you can maximize the FICO points. Lastly, after doing my own personal research, I have found that when your FICO 8 score goes up 20 points for example, your mortgage FICO score goes up by half of that which would be a 10 point increase.

https://www.youtube.com/results?search_query=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DM53wNlq6sro

https://www.youtube.com/watch?v=WEfsku-JgTs

https://www.youtube.com/watch?v=rt4PcrYpfXw