Credit score affected by Selling primary house in Austin area.

Round Rock, TX · Member since 2017 · 22 posts · 2 votes

Hi,

I am in process of putting my primary residence on the market for sale. I bought it 3/2018 as owner-occupied property as my first investment property. It will not cashflow any time soon so I'm thinking I should just sell it instead of renting it out.

How will selling it affect my credit score?

Bought with USDA loan. New build. Purchase price $206,000. I owe $201,000. 1,444 square feet. My mortgage is close to $1,700.00.

Thanks in advance,

Alissa

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Ryan KellyBusiness Member

Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes

You have a number of options and I would strongly consider adding 1-2 roommates to cover most of your costs. This will be WAY cheaper than selling right now based on your equity or finding a new place to rent. You can rent month-to-month or longer terms, plus you will be charging "rent by the room" rates which are cheaper for the roommates versus renting a full apartment and should be appealing to them right now. If you can avoid letting fear drive your decisions, you'll see there are a number of options. Feel free to reach out to any of us on this thread if you want to chat.

[email protected]512-674-5478

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Aaron K.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
Probably not much if you look up the factors for score it may affect type of credit and length of credit history as well as number of accounts but as long as you don't miss a payment you should be fine.
1 Reply
Guifre Mora
Lender · San Diego, CA · Member since 2019 · 874 posts · 355 votes
6y
Originally posted by @Alissa Rodman:
Hi,
I am in process of putting my primary residence on the market for sale. I bought it 3/2018 as owner-occupied property as my first investment property. It will not cashflow any time soon so I'm thinking I should just sell it instead of renting it out.
How will selling it affect my credit score?
Bought with USDA loan. New build. Purchase price $206,000. I owe $201,000. 1,444 square feet. My mortgage is close to $1,700.00.
Thanks in advance,
Alissa

Alissa the mortgage specifics has nothing to do with the score.

The short answer is yes it will affect your score.

How? it will depend on what else is in your credit report. Your account mix is worth about 10% of your overall credit score. Having a diverse mix of accounts, including credit cards, auto loans, mortgage loans, etc., will ensure you get the highest score in this area. So in other words, if you have a high debt ratio without the mortgage, by having a mortgage the ratio and positive payments affect it possibly but as soon as you remove the mortgage the scale moves. So potentially if your credit cards are maxed out and you drain the swamp you see who was skinny dipping.

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Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
6y
@Guifre Mora it's not a big negative though correct? I don't remember mine dropping a lot last home I sold
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Guifre Mora
Lender · San Diego, CA · Member since 2019 · 874 posts · 355 votes
6y
Originally posted by @Jordan Moorhead:
@Guifre Mora it's not a big negative though correct? I don't remember mine dropping a lot last home I sold

That's correct. You should see a slight drop based on your other items in your credit report or you could see a slight bump. But it should be minimal at best.
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Alissa Rodman
OP
Round Rock, TX · Member since 2017 · 22 posts · 2 votes
6y
Thank you for you replies. I am on the fence about selling. Realizing housing markets will be hit in a few months to maybe even a couple of years, I believe prices will eventually return to normal.
I just don't like paying such a high mortgage payment of $1700 every month in a house that is 1,450 sq ft. I bought it as rookie investor hoping to rent it long term. But, may only be able to get $1,500/month for rent. I was hoping to keep it long term and benefit from appreciation and rents rising.
With things so unpredictable right now, I'm not sure if I should go ahead and sell it now while I can or hold out and see where things go with the housing market in the future.
If I sell it (or rent it, for that matter) I'll be either sharing rent with a roommate or live for free with a family member. I'll be able to save more money and be able to buy smarter next time.
I asked Paul Moore this same question on the Bigger Pockets Live video Q&A this morning on YouTube. His response was good but not solid. You can see and hear his response in the video at 51:36.
What would you do in my situation right now? @AaronK
Thanks again guys!
Alissa Rodman
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Linda Osborn
Real Estate Agent · Austin, TX · Member since 2016 · 111 posts · 64 votes
6y
@Alissa Rodman
I don't think selling will affect your credit score much. But if you do not have another place to live, and have the income, I personally don't think selling is the best choice, either.
First, it will generally cost between 7-9% to sell ($206k × .08 = ~$16,480), so you would most likely have to bring money to the table. Maybe less if you have already identified someone to purchase for cash who does not have or need an agent. On top of that, you would then have to find a place to live. Your costs may be less than $1700/mo, but the living conditions most likely would be a step down. If you compare your mortgage payment (along with the tax advantages and equity gain over the longer term) to the cost of renting a comparable place, staying may be the best choice.
That said, if you decide to move, I think selling now is better than 4-6 months from now. I believe covid will affect Austin in the short term, and housing prices may dip over the summer. Too many people have pulled their homes off the market now or are holding off until stay at home orders are lifted. Between this, the "normal" seasonal increase of home sellers in the summer (which, when combined, may cause a short-term glut), and the reduced number of buyers able to buy due to current economics, I think prices will go down before they go back up.
If you want to discuss this further, feel free to Connect and/or DM me.
Best of luck!
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Alissa Rodman
OP
Round Rock, TX · Member since 2017 · 22 posts · 2 votes
6y
@lindaosborn
Thank you so much for taking the time to reply to my post. I really appreciate you doing some math for me and giving me your insight on this. I have been relying on unemployment benefits to help keep my head above water. I opt out of forbearance option due to affects on my ability to get another loan later and potentially impact my credit in a negative way. It would be extremely helpful for me to have someone sit down and with me and go over different scenarios and consequences with either decision: Sell, stay put or hold and rent. The latter is what I'd prefer. I am not aware of tax benefits of each scenario.
Time is not on my side if I want to sell any time in the near future.
Thanks again,
Alissa
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Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
6y
You have a number of options and I would strongly consider adding 1-2 roommates to cover most of your costs. This will be WAY cheaper than selling right now based on your equity or finding a new place to rent. You can rent month-to-month or longer terms, plus you will be charging "rent by the room" rates which are cheaper for the roommates versus renting a full apartment and should be appealing to them right now. If you can avoid letting fear drive your decisions, you'll see there are a number of options. Feel free to reach out to any of us on this thread if you want to chat.
[email protected]512-674-5478
Ryan Kelly Group - Keller Williams5110 Reviews
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Alissa Rodman
OP
Round Rock, TX · Member since 2017 · 22 posts · 2 votes
6y
Thank you, Ryan for your input. I think renting a room is a good idea short-term if I choose to live in it any longer. I have decided not to sell at this time. It just would not make sense right now.
I have the option of moving in with relative in west Texas and work over there when dental offices are allowed to reopen. What I would really prefer is find a tenant for the whole house this Summer and then I go to west Texas and live for free while saving a lot more money than I would by staying in my house for another year. That way, next year I'll be in a better position financially to purchase a second home in that market rather than Austin area.
What are your thoughts on that?
Thank you in advance,
Alissa
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Nicholas Covington
Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
6y
@Alissa Rodman would a refinance help lower the payment for you?
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Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
6y
@Alissa Rodman It sounds like you are putting together a pretty nice plan. If you elect to rent your Austin home it should cover most of your expenses. Think of it this way, even if you DID stay in the home and just had roommates, the tenants are basically paying down MOST of your mortgage, even if it isn't 100%. That's better than you living in the home alone and paying the full mortgage. If your housing costs get dropped down to $100-$300 a month, that's a win for you right now. This will clear you up to move to West Texas and get started in that market. If I can provide more info to help just let me know!
[email protected]512-674-5478
Ryan Kelly Group - Keller Williams5110 Reviews
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