topic Re: Installment loan - what would be best for short term credit report impact a in Mortgage Loans

Installment loan - what would be best for short term credit report impact and mortgage application?

Anonymous — Fri, 16 Nov 2007 17:40:17 GMT

We're buying a home in a couple of months, so I'm working on fine tuning my scores. I have a car loan that is my only active installment loan. Everything else on my report is revolving. The car loan has 27 months left (60 month loan), but I've been making excess payments to pay down the loan amount. (sinple interest loan) The balance is now at $5.5k, and the scheduled payment amount is $450. So I was debating:

paying it off early (money would deduct from the down payment amount for house)
paying enough so that I would have less than $4500 remaining (less than 10 payments)
Just paying my regular payment so I'd keep the installment loan on my report

Does anyone know what would be best for my CR or for mortgage consideration?

Thanks everyone for your help and input!

Re: Installment loan

Anonymous — Fri, 16 Nov 2007 17:45:25 GMT

2 more payments plus $50 will get you below 4500 -- and you said in a couple months - now is that when you want to settle or apply for the mortgage?

Re: Installment loan

Anonymous — Fri, 16 Nov 2007 18:17:19 GMT

Most likely we'll be going for pre-approval in Jan-Feb, but we might do it sooner if we find the right place.

If it would help to be below $4500, I'd probably send in a big check on my next payment, just so we're ready at any time. But would it help? Or would the debt still be counted because there's technically still 20+ months left on the loan?

Re: Installment loan

Anonymous — Fri, 16 Nov 2007 18:35:59 GMT

they will look at the payment and the balance - DTI is a manual calculation (and the current balance will be on your APP - written in by you) - or runthru a computer using the numbers on your app (compared to the CR, of course). As long as you don't lie (and you aren't) on the app then you are fine even if the CR because of reporting delays shows something different. The company that has the loan can also provide a statement with the balance to back you up. GMAC can be accessed online or phone - so I'm sure that yours can also. When to pay it down (and how) depends on when you plan to buy - decide on your timeframe and then start implementing your plan.

Message Edited by Lady_Scarlet on 11-16-2007 01:35 PM

Re: Installment loan

Anonymous — Fri, 16 Nov 2007 18:42:33 GMT

Thanks Lady_Scarlet! Since it would help, the next check that goes in will be just enough to bring me under 10 payments remaining. That way if we find the perfect house now (prices around here have been dropping like crazy with people wanting/needing to sell before the end of the year), it will be one less thing to worry about. (And I'll have a statement from the loan co with the balances).

Thanks again for your help.

Re: Installment loan - what would be best for short term credit report impact a

Anonymous — Mon, 03 Dec 2007 01:59:36 GMT

I am not sure if my last deal came through. The mortgage people I have talked to with the best rates tell me that even though I only have 6 pmts left on my car, it can not be excluded. The companies with a little higher rate tell me it can. I am confused. I miss out on my dream house because I was unsure what was going on. When I got approved by someone who excluded the car ($770/mo.) The rate was .5% higher.

Re: Installment loan - what would be best for short term credit report impact a

ShanetheMortgageMan — Mon, 03 Dec 2007 02:16:20 GMT

robywater wrote:
I am not sure if my last deal came through. The mortgage people I have talked to with the best rates tell me that even though I only have 6 pmts left on my car, it can not be excluded. The companies with a little higher rate tell me it can. I am confused. I miss out on my dream house because I was unsure what was going on. When I got approved by someone who excluded the car ($770/mo.) The rate was .5% higher.

That's odd... Fannie & Freddie both exclude installment debt that is 10 months or left from your debt ratio. Perhaps they weren't using a Fannie Mae or Freddie Mac loan program to qualify you, and had their own in-house loan program that they service themselves.... as not all loan programs go by that guideline. Is this a car payment or car lease you are talking about?

Re: Installment loan - what would be best for short term credit report impact a

Anonymous — Mon, 03 Dec 2007 02:22:45 GMT

It is a car loan. One of the loan officers was a family friend and recommended I refinance the car and reduce the pmt to below $300/mo. I wasn't willing to do that since it is almost paid off. It seemed like the new debt would lower my scores some. My mid score is 630.

Re: Installment loan - what would be best for short term credit report impact a

ShanetheMortgageMan — Mon, 03 Dec 2007 05:18:14 GMT

Did you tell him that ShanetheMortgageMan tells him that Fannie & Freddie doesn't include debts with 10 months or left on them? Perhaps he is just not aware of that guideline and thinking he knows what he is talking about...

Re: Installment loan - what would be best for short term credit report impact a

Anonymous — Mon, 03 Dec 2007 17:13:36 GMT

Thank you Shane, I will. Thanks for the help.