Loan Just Prior to Pre-Approval

[Anonymous]

Long time lurker first time poster - my wife and I were just pre-approved for an FHA loan on Friday that we applied for on October 5th. We've been spending the past couple of weeks working with the mortgage broker on getting everything in - especially regarding her student loans (she's still in school so we had to get her estimated monthly payment).

Back in September, around the 25th - I applied for a personal loan of $4700 with Personify Financial with the goal being to bring my credit card debt under the 30% utilization mark. For whatever reason they were very non-responsive so I figured that I'd been denied. On Friday - about an hour after I received the pre-approval letter for the FHA loan - I received an e-mail from Personify apologizing for the delay - that my loan had been approved and the funds would be in my account on Monday (tomorrow). I read repeatedly that you're not supposed to apply for any new credit during a mortgage process, but how much will this count against me since:

a. I applied for the loan at least two weeks before applying for the mortgage - I just didn't get it for whatever reason until we were already in the pre-approval process

b. I will be completely paying off half my credit cards while bringing the others to or under 30% utilization

c. The $4700 will show on my credit as an installment loan but my revolving/unsecured credit utilization will drop by that much (possibly more)  - and installment loans are viewed differently

d, The monthly payment on the installment loan is about $120 less per month than I would be paying on the credit cards. And obviously I wouldn't use any of the credit cards at all until after closing.

I plan to talk to my broker and inform him of this tomorrow, but just wondering if anyone here had any thoughts/advice?

[Anonymous]

It isn't the best look to be honest, but what's done is done. It will be on your credit report. It's up to the LO to decide to move forward. Most LOs dont like seeing new loans or applications for credit within 6 months of mortgage application. Nothing to do now but keep your fingers crossed.

[Anonymous]

Most mortgage brokers have a credit simulator let yours know about the loan and ask if you should take the loan or deny it.  The inquiry should have shown up on your credit report when you applied for the mortgage.

[ezdriver]

Like you plan to do, let your LO know what happened. A lower monthly payment, and the use of the money from the loan, is financial management with positive results. I think you will be ok.

[Anonymous]

I talked to my broker this morning and explained everything - he said that since it was before we even applied it wouldn't be held against me. Even though it's another debt using the funds the way I planned to works in my favor as four credit cards will be paid off and show a zero balance and the others will be at or under 30% utilization - and will remain this way until after close. Doing this also drops my minimum monthly CC payments down $275 before the $168 loan payment - so I've effectively dropped my monthly debt payments by more than $100 and show a zero balance on over half of my credit cards.