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payoff auto loan, 2 months before qualifying for home loan?

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TheGardner
Valued Contributor

Re: payoff auto loan, 2 months before qualifying for home loan?

If you are above DTI they can make paying it off a condition on funding the loan after approval. Basically, as a condition you will have to pay off the loan for funding. The pay off receipt will be enough proof.

Doing it this way it will not update on your reports as paid and closed before closing. So the risk to score dropping is minimal.
If anyone needs me I will be In The Garden. Goal Score: 760 for all in 2015.
Current FICO Scores EX: 715 EQ: 756 TU: 762
Last APP April 21, 2015.
Victim of The great AMEX HP heist of Dec 1st, 2nd and 3rd of 2014.
Message 11 of 14
HiLine
Blogger

Re: payoff auto loan, 2 months before qualifying for home loan?

If this is your only installment loan, your score will definitely suffer if you pay it off. Expect a drop of 10 points or more.
Message 12 of 14
giosan32
Valued Member

Re: payoff auto loan, 2 months before qualifying for home loan?

Great advice everyone, I think I will pay it down to 1000 and pay the rest after closing and since it is my only installment loan I dont want a drop in my credit

Message 13 of 14
frugalQ
Valued Contributor

Re: payoff auto loan, 2 months before qualifying for home loan?

Be careful with closing an installment loan.

My DH and I just went through this. We are building a home and paid off one of our cars. My DH ended up losing 16 points with Experian (version 98)....he gained 15-20 pts with the other two bureaus (EQ beacon5 and TU 04)

WHen we first applied in September, EX was his mid score. When the lender refreshed our scores last month, EX was his lowest score and EQ became his mid.

When I pulled EX FICO score from here after the account reported closed, his score actually increased. But, the direct opposite happened with the mortgage version.

I'm guessing that EX 98 puts more weight on open vs closed accounts. That's the only logical explanation as to why the 04 scores (EQ and TU) were not negatively impacted but 98 (EX) was.

FYI...my husband has a second car, student loan, and mortgage still open on his reports.
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Message 14 of 14
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