Paying off my mortgage

[Anonymous]

I am trying to get a jumbo mortgage in 2/2019 and am told I need a middle score of 720. I am right there but am wondering if paying off my current mortgage next month (only mortgage I have on my report) will lower my score? Thanks!

[JVille]

Do you have a choice? Time to see what else is holding your scores down. Any lates or other baddies? Utilization over 28% or even 8%.

[pipeguy]

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@Anonymous wrote:
I am trying to get a jumbo mortgage in 2/2019 and am told I need a middle score of 720. I am right there but am wondering if paying off my current mortgage next month (only mortgage I have on my report) will lower my score? Thanks!

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Paying off your mortgage will drop your scores 15 to 20 points which will recover once you get a new mortgage.

Simply put FICO scores need #1 revolving, #2 installment such as car loan, and #3 Mortgage. Revolving (credit cards) are weighed the highest to maximize your credit mix and scoring, report a zero balance on any of the three will drop your scores. Although revolving is given the most weight, the other two counts as far as on-time payments, utilization is weighed more towards revolving than installment or mortgage (because they are not open-ended credit lines and show as 100% "utility" when opened and really don't affect your scores much if at all as you pay them down). 

It's very possible to have high FICO scores without a car loan or mortgage as long as you have a good history of credit card usage, but once all three "types" are used, removing one (zero balance) will drop your scores.

[Anonymous]

What is the current utilization percentage on your open mortgage? 

If it's high and you have the ability to pay it down to something low (but not quite pay it off) it could positively impact your scores.

[Anonymous]

To give you the best advice, we need a description of all open loans that you have right now:

Loan 1.  Balance = ____   Original Loan Amount = ____

Loan 2.  Balance = ____   Original Loan Amount = ____

Loan 3.  Balance = ____   Original Loan Amount = ____

etc.

While you are getting us that info, you should contact the loan handler for the mortgage and ask what would happen if you paid the loan down but NOT off.  Some loan handlers will push the due date for the next payment back several months when you do that.  If so, paying the loan down but not off (so that the mortgage stays open all the way up until the time you own the new house) would be safe and might even help you.

PS.  Do you have all of your credit cards reporting at $0 except one, with the remaining card reporting a small positive balance?  If not, that would be a better use of your money than paying down or paying off loans.

PPS.  As the other commenter asked, we also need to know whether this mortgage has hit the end of its life and you only have a few more payments before it closes naturally.

PPPS.  Bear in mind that two of the three FICO mortgage scores are affected less by loan amounts than is FICO 8.  Still, paying the loan down but not off is the safest strategy.

[Revelate]

Ah wait a second.

Jumbo loans: we are probably talking about the standard trimerge pull, EQ FICO 5 and TU FICO 4 don't care about it, whereas EX FICO 2 does.

That said, full stop: unless you need to clear out room for a DTI calculation as directed by your lender, do not pay off your mortgage - it's really that simple... it doesn't make financial sense currently, you may want those assets in your new housing expedition, and it's either going to be no change to your score or a negative one.

If your EX FICO 2 alone is close but not quite to where you need it to be, then perhaps look at what CGID correctly suggests in paying your mortgage down, but not off... but know exactly what your trimerge scores are before you do that, either from a lender pull, or you can pull a 3B report from here to get all of them.