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Lump Sum Debt Payoff


Charlie854
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Hello.  I have a question regarding mortgage approvals and debt payoff. 

 

We are in revolving debt about $50,000 with a credit utilization of about 90%, zero late payments, collections, etc., scores are 750, degraded because of the utilization.  We plan to move in a month or two from a higher cost of living area to a lower one down south eventually to retire, buying again.  Will have about $150,000 in proceeds.  Mrs. is a traveling RN and I am retired with a pension.

 

The questions:  Are we better off liquidating an investment, no penalty other than taxes, to pay the debt then use the sale proceeds to put back into the investment so there is time for updating of credit reports and scores or do we just use the proceeds to pay the debt, not giving time for credit report updates?  Will it raise concerns with the sudden payoff and where the money came from if paid now two months ahead of applying for a new mortgage or is it customary to see debt paid from proceeds without the immediate reporting to the credit bureaus?

 

Thank you.

 

 

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On 1/13/2022 at 10:45 AM, Charlie854 said:

Hello.  I have a question regarding mortgage approvals and debt payoff. 

 

We are in revolving debt about $50,000 with a credit utilization of about 90%, zero late payments, collections, etc., scores are 750, degraded because of the utilization.  We plan to move in a month or two from a higher cost of living area to a lower one down south eventually to retire, buying again.  Will have about $150,000 in proceeds.  Mrs. is a traveling RN and I am retired with a pension.

 

The questions:  Are we better off liquidating an investment, no penalty other than taxes, to pay the debt then use the sale proceeds to put back into the investment so there is time for updating of credit reports and scores or do we just use the proceeds to pay the debt, not giving time for credit report updates?  Will it raise concerns with the sudden payoff and where the money came from if paid now two months ahead of applying for a new mortgage or is it customary to see debt paid from proceeds without the immediate reporting to the credit bureaus?

 

Thank you.

 

 

No, use the proceeds from the sale of your home to pay off your debt, As long as you lived in the home for 2 out of the last 5 years you will not have to pay tax on the proceeds.

Your scores are high enough, at 750, to qualify for the best mortgage terms.

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