Effect of paying off a mobile home loan?

[Anonymous]

Hello everyone,

We're trying to get an idea of what the effect on our fico scores will be by paying off our mobile home loan (roughly 17 years early).

We're in the process of trying to get ready to buy a house.  We've been trying to research our credit and getting a loan on a house with our current status.  I've pulled all 3 credit reports (today) and creditkarma.com shows me with a 725 credit score.  I understand creditkarma != TU/EQ/EX fico scores, and would like to see the 3 official fico scores too.

We currently live in a single-wide mobile home that has roughly $31K left to pay (out of $34K initial loan).  We have to pay off the loan to get the title so we can sell it.

We're 100% on-time "all the way back to day one" with all payments on credit cards, car payments, and the mobile home loan.  Nothing negative EVER. We just paid off our one open car loan this month (10 months early) to free up $ in the monthly budget.

Credit reports show a total of 10 accounts (credit card, mobile home, car loans, checking overdraft protection, etc.) with 4 of them closed "paid".  The car loan we just paid off is still showing there, at least as of this month.

One problem is CCU is currently at 89%, roughly $12,400 out of $14,000 available, with one of the credit card accounts open roughly 15 years. ie, we've been carrying a relatively high balance on the revolving charge cards for a while.

We've seen a lot of info indicating that paying our credit card balances down would probably have the biggest impact on our credit scores, but not really so much info on the effect paying off the mobile home loan/mortgage would have.  Creditkarma's "what if" tools project my credit score going up to 769 if I paid off all credit card balances (but didn't close the accounts), but I really have no idea if we will see that kind of a boost by paying off the mobile home. We're hoping we would see some kind of boost.

Everyone says a single-wide mobile home loan isn't considered a true home mortgage, it's more of an installment/personal loan.  Our TU report shows the loan type as a mortgage, and so does Equifax.  Experian shows it as an installment loan. The lender is Vanderbilt Mortgage.

In any case, we really have to pay off the mobile home to get out of here, so we have the title and are able to sell it.  We want to close on a house and start moving in, then sell the mobile home once we're moved out so nobody has to wait for us to vacate it.

So I guess the big question is:

Since we just paid off the car (installment loan) and are going to be paying off the mobile home (either a mortgage loan or our only other installment/personal loan), are we likely to see a BOOST in our fico scores, or are they going to DROP because we are going to be closing out (paying off) our 2 non-credit card loan accounts?  We want to get the absolute best interest rate possible, but I'm starting to fear that these 2 "moves" might actually reduce our score.

We're hoping we can get a home loan approved and close on a house before we have to start attacking the credit cards.  The $30K family help we're going to have to pay off the mobile home is a "one shot deal" -- while we could use some of it to pay off our credit cards, it wouldn't leave enough to pay off the mobile home, and if we don't have the title for the mobile home we basically can't get out of here.

Thanks for any info anyone can offer,

24junkie

Message Edited by 24junkie on 06-25-2009 12:04 PM

[Anonymous]

If it helps to put it like this, the amount of debt on my credit record is about to drop from roughly $46K down to $12,500 (car and mobile home loans being paid off), with all that remains being considered revolving/credit card debt.

We'll still be at roughly the same CCU (credit card utilization) plus or minus this coming month's payments.  We plan to rachet up the credit card payments, but we also have to try to hold onto some cash for the various expenses we know we will have buying a house, down payments, hiring an inspector, etc.

Thanks again,

24junkie

Message Edited by 24junkie on 06-25-2009 11:33 AM

[haulingthescoreup]

Hi, and welcome to the forums!

I understand the reasons for paying off the mobile home first, but in terms of bang for the scoring buck, you'll do way better to pay off the CC's and apply the rest to the mobile home. (CreditKarma is fun, I suppose, but their advice is worthless for FICO scoring, and of course, its score is completely meaningless.)

Now that you've paid off your last car loan (congrats!), your mobile home loan is your last installment account. When it's paid off, you'll lose that credit mix, although credit mix is only 10% of your score. Nevertheless 10% of 550 points (300 - 850 score range) is 55 points. Not that you'd lose that much by any means, but you might lose 5-10 points

89% revolving util is going to be tough to carry into a mortgage loan appointment, I think. Is there any way that you can at least get it to 49%, use the rest on the mobile home loan, and then keep paying it off? Right now, you're showing as maxed out.

I do see that the sticking point is getting the title, but I don't think that you're going to get much score movement by paying off the installment loan. Certainly it will help your debt-to-income ratio, which is a separate issue from FICO scoring.

This is a useful resource for understanding FICO scoring:

Understanding Your FICO ® Score

[Anonymous]

haulingthescoreup:

Thanks so much for your reply.

In the meantime my wife and I both went ahead and signed up for the Score Watch service so we could get a real FICO score and report. She has a couple of charge accounts in her name only so they don't reflect on my credit.  We both have Equifax scores of 749!

I ran the Score Watch FICO simulator and it estimated that if I paid $12,000 of the showing $12,266 of revolving credit my score would go to between 809-849!!  (and also, btw, that if we paid the entire $12,266 it would go to between 799-839, so a good example of what I've seen everyone saying in the forums about carrying a small balance being a bit better).

It's a shame we can't just leave this mobile home here, haha.  It would be great if we could find a buyer that was willing to pay whatever price we agreed for the home up front, let us pay off the rest of the mortgage with some of the family help, and then wait the estimated 3 weeks for the title to clear and arrive.  Then we could use the rest of the family help to pay off all but a token balance of the credit cards for the major FICO boost it would get us.  But we'd be really, really fortunate to find a buyer like that.  I've heard stories of folks losing a buyer on a used mobile home just because they couldn't get their hands on a title the same day.

Hmm your advice does give me a couple new ideas, though.

thanks again!

24junkie

Message Edited by 24junkie on 06-25-2009 04:59 PM

[haulingthescoreup]

You're most welcome, and yours is a classic example of how what might be good for your FICO scores isn't necessarily what would be good for you financially.

Unfortunately, with a mortgage app in your FICO, you have to try to satisfy both!

Good luck to you two! I know people who are looking for mobile homes and can pay for them, but there's the eternal snag: trying to find land or a lot.

[Anonymous]

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@haulingthescoreup wrote:

Good luck to you two! I know people who are looking for mobile homes and can pay for them, but there's the eternal snag: trying to find land or a lot.

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Thanks... I suspect we are going to have to get good at crossing our fingers and toes in the new couple months.

If it just so happens you know of anyone looking around the Raleigh NC area we'll have a nice one in a decent park ready for the market in a couple more weeks.

24junkie

[Anonymous]

W00t

Talked to Sun Trust this morning, they said we would have NO PROBLEM getting a mortgage up to $200,000 right now at their best interest rate, even with the mobile home monthly payments still figured in, and would most likely be eligible for an FHA loan with the 8,000 tax credit.  May have to have 3.5% down of our own (not counting the 8,000 credit) but not 100% sure how that works yet.

Going back to meet them today, maybe go through pre-approval.

So much we have to figure out now... but at least we know we don't have to pay off the mobile to just GET a loan.  They said the credit cards wouldn't be so much of a problem with the low utilization of our monthly income for minimum payments etc.  Also this is who we had our car loan with that we just paid off 10 months early.

cheers,

24junkie

Message Edited by 24junkie on 06-26-2009 07:30 AM