How would this car payment be calculated for DTI on a mortgage?

[Anonymous]

Looking to apply for a mortgage in 6-12 months and I'm curious about this auto loan. Basically wondering if the monthly payment would be included in the DTI and if I should pay it off before I apply for the mortgage or after?

Have a car loan from January 2017. Started at around $9000 and has been sitting at $12-13 for over a year now. It incurs around $.01 in interest per day which I don't mind paying to keep it open on my credit reports to increase my scores since it's my only installment loan. When the statement comes each month my payment due is $0.00 even though the monthly payment was supposed to be $176. After speaking with their customer service department, my next payment isn't due until May 2020.

I could obviously pay this off at any time and only keep it open for scoring purposes. What would you do with this loan when applying for a mortgage? Keep it to help score? Or dump it incase they'll use my $176 minimum monthly payment for DTI calculations?

[AZEsq]

Keep it because; 1) Closing an installment—even one so recently opened—would likely drop your scores in the short run; 2) The payment on your credit report would be zero, it reports an updated payment; and 3) if you only owe $12 it only makes sense to pay it if your broker tellls you to. Also, FYI, it will report as paid in full for 7 years anyway...

[Girlzilla88]

I completely agree with the person above paying it off will decrease points and I wouldn't recommend it at all!    You also want to keep your AAoA's higher and if you remove it that will affect that also. 

[VALoanMaster]

I agree, keep it open. 

If you need the extra $176 to qualify for a mortgage, a lender can set it up so that you have to pay the account off at closing. This way you'll have your mortgage rate locked in & your mortgage loan closed before there's any impact on your credit scores from closing that account.