Post # 1
Fiance and I intend to go get pre-approved for a Mortgage about a month after our Wedding next March. We’ve been taking as many necessary steps to getting in good fiscal shape before then as we can.
Both of our credit scores are in the mid-to-high 700’s with 100% on-time payments. By then, the only debt we will have is $4,000 remaining on my Student Loan (we have no revolving credit card debt). The monthly minimum on my loan is $199. I have the ability to pay it all off before we get pre-approved, but I wanted to know if that is advisable or not. The reason I wonder is because it it my oldest line of credit (i took it out when I was 17).
If I pay it off completely before we get pre-approved, will it reduce my credit score since the average age of my credit accounts will be lower? Or will it HELP us in the pre-approval process by showing that all of our income is available to us and none of it is tied up in debt/loans?
We think we will get approved for a Mortgage that is more than we are willing to spend on a home. We crunched our numbers and have determined where we feel most comfortable, but we’d like to get the best interest rates and pre-approval amount as possible for us.
Any word of wisdom? Are we on the right track? Anything else we should know? Thank you!!
Post # 3
- Wedding: August 2013 - Rocky Mountains USA
I’m not sure, but it sounds like you’ve done a lot of research – nice work. When I was gearing up for and going through the pre-approval process, I would just call a mortgage broker to ask questions like this. You don’t even need to eventually get your mortgage through them. I’d recommend just giving your local bank (or a mortgage broker in town) a call…
Post # 4
@lolot: I agree. Get in touch with a mortgage broker now and ask them about your debt. I think for us it would have been better if I didn’t have my small student loan, but we have both had credit cards for 7 years at the time getting our mortgage.
Post # 5
- Wedding: July 2012 - The Gables Inn, Santa Rosa, CA
You’re definitely on the right track, but I would wait to pay off the loan. It stays on your credit report as a “closed” account after it’s paid off, so that’s not the worry. But when you’re actually putting offers in on houses, it looks good to a prospective seller if you’ve got more cash-on-hand, this shows them that you’re more serious than someone who might not have the extra few thousand sitting around.
Since your credit scores are both over 700 you’re already looking at being in the best interest rate bracket anyway, having or not having a $200/mo payment wont change that much.
Also, once you buy a place there will be lots of little incidentals that come up, or in my case, some BIG ones (like driving over a piece of shrapnel and blowing out 2 tires that need a $700 fix 3 days after opening escrow!!), and having a little extra cash will make that transition easier and less stressful if you need it.