topic Re: Auto Equity Loan for Installment Exposure? in Mortgage Loans

Auto Equity Loan for Installment Exposure?

The_Asset_Underwriter — Sun, 15 Sep 2024 06:17:00 GMT

My spouse and I are preparing to get a mortgage in 2027 and are trying to make sure our FICO scores/Mortgage FICO are in the best shape possible by then. Currently my average mortgage FICO is 790 and hers is around 740.

We both have relatively thick credit profiles with mine being a bit more comprehensive. We both have 7+ credit cards but I have 3 paid off auto loans and 1 open auto loan with a balance less than 2% that I'm keeping open thru 2029 to boost my credit. My spouse has only 1 paid off installment loan that was a student loan and no open installments.

I'm wondering if whether getting another installment line open for her now will help her mortgage scores and help us get the best rate in a couple of years when we apply.

My spouse's car is paid off but I was wondering if applying for an auto equity loan using the paid off car as the collateral would be a smart choice. I'm not worried about interest or fees because I would immediately pay it down to 1-3% remaining and just keep it open through the life of the loan.

Considering most lenders take the lower of the two FICO's when a couple applies for a mortgage, would the strategy of getting an installment loan for her right now be good?

Re: Auto Equity Loan for Installment Exposure?

JoeRockhead — Sun, 15 Sep 2024 09:45:34 GMT

Welcome to the forum. By 2027 mortgage lenders might be using Fico 10T and/or Vantage 4 scores.

I wouldn't go the auto equity route. Instead look at a SSL loan from Penfed or NFCU (if eligible to join NFCU). The rates are likely to be better than on an auto equity loan.

Otherwise, you should be practicing AZE0, or in your case with 7 revolvers, you could do up to AZE3 (or under 50% of revolving accounts) without score penalty for too many accounts with balances.

Re: Auto Equity Loan for Installment Exposure?

The_Asset_Underwriter — Sun, 15 Sep 2024 15:24:26 GMT

Thank you for your help! I looked up SSL loans and it seems like NFCU calls them Certified Pledge loans where they lend against a CD. Is that the same concept you were recommending?

I think that's a great strategy, but I'm not sure if we'll qualify to be members.

Assuming we don't go down that path, would any other secured loan be the best option, or would unsecured loans like a personal loan have the same benefits for her credit?

Thanks for the AZEO tip. I'm planning to practice that starting12 months before we apply.