$0 balance credit cards included in debt calculations????

[Mike_B03]

Definitely a lender thing. For our DTI, they only took into consideration the credit cards that showed a balance, the ones that had a $0 balance were not included. 

[Autumnslight]

I also agree that's definitely a lender thing. Here's a link to HUD Handbook 4155.1, Chapter 4, Section C, which discusses what debt obligations are included in your ratio calculations. Page 4-C-19 and 4-C-20 appear to be what your lender is referring to, but page 4-C-23 states that open accounts with zero balances are not considered debt. I think pages 19 and 20 could be written a little better to make it clear how you treat a zero balance revolving account, but the conclusion really appears to be that you don't count any monthly payments on those.

Personally (because it's my money ultimately and so I don't really care if I'm a pain in the neck), I'd show this to the LO and ask for an explanation. If they still wanted to count it, I'd go elsewhere. 

[DallasLoanGuy]

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@jjmtmj126 wrote:

This LO that I have been talking to from a bank is telling me that due to new FHA rules, they have to include your minimum credit card payment for every credit card you own, even if it's a $0 balance... This just really stinks, because between my hubby and I we have about 12 cards.  Most are $0 balances and are small stupid cards that we got when we were trying to rebuild our credit and/or store cards that we really just don't use.  

I know closing them would be bad for our scores, so we can't do that... but 12 cards at $25 minimum payments (at least...) That's $300 added to our monthly debt calculations!  

The LO did mention some way of getting around this buy using small amount on each card or soemthing, and that they could use a percentage of the balance instead of the actual minimum payment.  Does anyeone know about this, or have any experience with this?  Do you know what the percentage is that they would use?  

I'm just trying to prepare myself.. if I have to use these cards I want to know the absolute minimum I have to use.  

And won't this actually HURT my score, because my CC utitization will go up?

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do not walk, do not pass go..... do not return that lenders calls.....  RUN from that lender.

one of 3 things happening here

1. that lender has a crazy guideline i have never heard of at ANY other lender

2. that LO doesn't know what they are talking about

3. that LO smoked a fattie at lunch

[jjmtmj126]

hmm... thanks for all the replies.  I'm so glad I have this forum!!!  

This is a major bank, so I'm not sure why they would have such strange policies.  But honestly, I've only kept my money in this bank to gain a mortgage with them, so now I have an excuse to close my account.  

There is another LO i'm going to talk to tomorrow from a mortgage company that my realtor recommended.  HOpefully he'll be more reasonable about credit card balances.

[Anonymous]

Incidentally, I would make it a point to ask (if you do open a new checking account any time soon) to be sure that they don't perform a hard inquiry.  An employee of mine mentioned that opening a new checking account resulted in a hard inquiry for him.  Very strange but also probably something you don't want right now.

Good luck!

[JM-AM]

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@Anonymous wrote:

Incidentally, I would make it a point to ask (if you do open a new checking account any time soon) to be sure that they don't perform a hard inquiry.  An employee of mine mentioned that opening a new checking account resulted in a hard inquiry for him.  Very strange but also probably something you don't want right now.

Good luck!

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Its actually not strange. Many Banks have been doing this for several years.

There are still many banks that do not cause a Hard INQ, but its a risk factor as most customer reps have no idea what you are talking about, if you ask them.

[StartingOver10]

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@DallasLoanGuy wrote:

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@jjmtmj126 wrote:

This LO that I have been talking to from a bank is telling me that due to new FHA rules, they have to include your minimum credit card payment for every credit card you own, even if it's a $0 balance... This just really stinks, because between my hubby and I we have about 12 cards.  Most are $0 balances and are small stupid cards that we got when we were trying to rebuild our credit and/or store cards that we really just don't use.  

I know closing them would be bad for our scores, so we can't do that... but 12 cards at $25 minimum payments (at least...) That's $300 added to our monthly debt calculations!  

The LO did mention some way of getting around this buy using small amount on each card or soemthing, and that they could use a percentage of the balance instead of the actual minimum payment.  Does anyeone know about this, or have any experience with this?  Do you know what the percentage is that they would use?  

I'm just trying to prepare myself.. if I have to use these cards I want to know the absolute minimum I have to use.  

And won't this actually HURT my score, because my CC utitization will go up?

---

do not walk, do not pass go..... do not return that lenders calls.....  RUN from that lender.

one of 3 things happening here

1. that lender has a crazy guideline i have never heard of at ANY other lender

2. that LO doesn't know what they are talking about

3. that LO smoked a fattie at lunch

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+1 agreed. How can a zero balance credit card have any other payment than zero!!??

[Autumnslight]

I have a whole bunch of accounts (revolving and installment) on my credit report that have zero balances but show a monthly payment amount. I don't know why they're reporting that way, but they are. I haven't bothered disputing them because they're mostly old accounts and I don't want to risk messing things up and getting them deleted. I figure if a loan officer wants to give me trouble over them, I'll ask them to explain their rationale, and then take my business elsewhere if they're still being unreasonable.

[MovingForward_2012]

They added my min payments as well. Once you make a charge, the credit card company updates the highest balance and the associated min payment on your credit report. So even if you haven't used the card in awhile, that $25 min payment still shows up on your credit report. I have 3 cards and I pay the balance down to $0 every month. When my LO did Desktop Underwriting, he factored in the total min payment of all my cards, which totaled $75 and it affected my DTI. I mostly only charge every day expenses on credit card and I don't carry a balance but the way my LO calculated it is if I carried a balance and only pay my min payment each month. Which is not how I operate but I guess they do it to assume worst case scenario. Similar to how paying off your leased vehicle doesn't help your DTI because the LO assumes you will lease another car. My loan is FHA too and I am closing this afternoon!

[MovingForward_2012]

Maybe it was because I had a small balance on each card when DU was done because even though I pay the full balance every month, I often make charges before the credit card balance is updated to my credit reports.