I'm a first time home buyer but I have a existing auto loan that prevents me from buying. Can i pay off my auto during my home loan process?

Asked by Cj Johnston, Bunnell, FL Mon Dec 20, 2010

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Jose Morales, Mortgage Broker Or Lender, Lutz, FL
Mon Dec 20, 2010
Yes you can and should. However, be careful before you do. Ask your mortgage professional if you are working with one, or give me a call for advice. Some lenders don't allow it to be paid of at closing. So I recommend you proceed as follows:
- First make sure you would have enough funds to payoff the car and still have enough for down payment, closing costs, etc.
- Once you pay it off and depending how soon you want to buy a property, you may have to do a rapid rescoring so that your credit report is updated. That's the process by which your credit reporting company submits evidence of the payoff and they immediately update your credit report. It takes 3-5 days for that. There is a fee involved for rapid rescoring. Either that or you wait about 30-60 days and hope they have reported that account as paid for.
- Make sure you have other open and active tradelines(like other credit card accounts) in your credit report. However, even if you don't, some lenders allow to add non-traditional accounts to your credit report such as rent history, insurance payment history, cell phone payment history, etc. Not all lenders allow that however..
- An analysis should also be done to make sure your score will not be affected after paying off the car.

Please consult your mortgage professional before proceeding. Or call me if you like for a free consultation.

Jose Morales
Florida Mortgage Coach
1 vote
Rudy McDowell, Mortgage Broker Or Lender, Bloomfield Hills, MI
Mon Dec 27, 2010
Hi, Cj

John's reply is spot on. If you're going to pay off the car loan, do so before your file goes to underwriting. Then you will not have to source where the funds to pay it off came from. Furthermore, since it was paid off within the last 12 months, you'll still be able to count it as a usable trade line and viable credit history.
0 votes
C.Pat Denvir, Agent, Palm Coast, FL
Wed Dec 22, 2010
I noticed no local Realtor offered help. I work with several bank loan officers and they have gotten some tough loans through. E-mail me if you want their names. No obligation. i don't 'capture' you. i just do not want to see another would be buyer take on more than they can handle.This is what got us into the real estate mess we ae in. i do want to help. I have helped several families in Bunnell.
C. Pat Denvir, Realtor
Coldwell Banker Ptemier Properties
Palm Coast, FL
0 votes
Cj Johnston, Home Buyer, Bunnell, FL
Mon Dec 20, 2010
I worded that wrong. My problem would be i cant afford both a 560 dollar auto payment and a house payment. I was asking if I could pay off my auto loan so i would be able to afford the home payment.
0 votes
Julie Cverc…, Agent, Debary, FL
Mon Dec 20, 2010
yes, but consult with your mortgage loan processor and they will guild you on what to document, etc
0 votes
Dallas Texas, Agent, Dallas, TN
Mon Dec 20, 2010
Who stated it prevents you from purchasing a home? Mortgage broker who you submitted your loan application to?

If yes then follow there advice HOWEVER if you pay off your car loan does that provide you enough for 3.5% or more down payment, closing costs, inspection, appraisal , moving costs and etc.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes
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