Just paid off a bunch of debt - when should I apply for a home loan?

Question

I am in the market for my first home. I have 20% down and decent credit - 670 score. I had a fair amount of credit card debt and 2 car payments. I felt it was in my best interest to pay as much off as possible, while retaining my 20% down payment, before applying for a home loan.

I paid off the car and the majority of my credit card debt. My credit card usage is around 16% of my available credit now. And I now have one car loan instead of two.

Before I built up this recent debt I had a 770 score and I haven't had any delinquencies or negative marks on my credit report since then. As such, I'm hoping paying these off gets me into the low to mid 700s.

I have found a home that I like but I want to be sure I apply at the right time. My question: do I need to wait for my credit reports to show the most recent updates, e.g. updates from my credit card companies showing the paid off cards and updates from my bank denoting the paid off car loan? I'm assuming it's the best course of action and I just need to be patient and hope no one else gets the house, i.e. just telling a loan officer that I paid all this stuff off and it isn't yet showing on my credit report won't really cut it.

Anyway - thanks for any advice.

Answer 1

To get the best mortgage rates, you'll want to wait for your score to go up a bit. I would suggest going through loan approval process when you hit 700 or above. If you've made a bunch of changes, give it 60-90 days to take some effect.



You're doing the right thing - having 20% down is going to help you a lot. Great job on saving. Be patient with your credit - a low interest rate will help you save thousands over the years.



Hope that helps

Answer 2

Lenders look at your credit score as well as the types of debt you have. Paying off your debt can look bad. Your credit score is based on the various types of accounts you have. Some times leaving your credit card open with a balance makes you look better. You should ask the lender what they want to see. Let them see your credit report and ask them. Tell them you have paid some things off. They will look at your debt to income ratio. You have a good score, just hope that paying some things off didn't lower it.

Answer 3

I would wait about 6 months to ensure everything is reported to the Credit Agencies. Also, it won't look like you just paid off some debt, it will show you available credit and that you are not using it.

Answer 4

Normally yes but the first time home buyers tax credit expires on November 30th. If you don't start the process quickly, you may not be able to close before that date causing you to lose the tax credit.



It may be worth it to talk to the lender about your situation and ask them to pull your credit again during closing to get the best interest rate. You could also get pre-approved or pre-qualified, make an offer, and when the offer is accepted and the home is inspected, shop around for the best interest loan.

Answer 5

I'm doing the same thing. I'm signed up for freecreditreport.com and i check my report every month once I've posted all payments to credit cards and car loans, etc. My credit score jumped 23 points just paying off two major credit cards. It took about one month for it to show up on my credit report, but having it available to check monthly shows me where I am, and what I need to be doing to eliminate more derogatory things off of it. Good luck to you and your house!!! I'm in the same boat! :)



also check to make sure your credit report shows only correct info!

Answer 6

i would wait at least one billing cycle so that credit bureau receives updated data for paid off balances.



hint: pay off credit card balance before statement is cut so that usage is 0%. paying balance in full is not enough to max out fico score.