Hi! My wife and I am in the market to purchase a new home in Texas. I have a question in reference to credit worthiness when applying. I appreciate any input you might have. This is the basic facts. Income: $4,000 a month (one income) Debt: $27,000 (two car loans, $8,000+$19,000, nothing else) Savings: $25,000 (not counting retirement savings) My question is: Would it be best to use savings to pay off one of the car loans before applying for a mortgage? I pay $1000 a month now on both cars but would be paying $400 a month if I get rid of the $8000 car loan. I appreciate your help. Thanks.
Disturb nothing before talking to a mortgage professional. Also, paying off installment loans early and suddenly doesn't show the kind of predictable behavior banks covet as producing the highest profits for them. It can backfire.
If the car loan becomes a problem with the bank, they will ask you to pay off what is necessary at closing. They will take care of all the paperwork, and you may just have to pay a wire transfer fee that will be included in your closing costs. I wouldn't do anything until they request it, and you'll probably need as much of the cash that you've saved for the down payment anyway. Do you have a good credit score?
My recent VantageScore was 880. I do not have a fresh FICO but it was 790 about 3 years ago (got no reason to believe that it has changed for the worse). The car loan question is now an outdated question. My wife paid off the $8000 loan yesterday without checking with me first. So now we have paid off a $38,000 car loan in a year and a half. We have paid off all our car loans in the past (two previous cars) in about half the time stipulated (usually make double payments). We are looking at getting a house in the $125k-$145k price range. I am in the military and this would be our first house so I will go for a VA loan. In addition I expect to get the $8,000 tax credit as a first home buyer. Any advise to give me to get the best possible interest rate for the loan amount needed? Thanks for your assistance.
