Are utils a deal breaker?

[Anonymous]

ok. would like to apply for a mortgage loan(FHA) 1 June in Northern VA (Prince William or Stafford County).  i'm only looking for about 225K; moreso as a cushion, but prefer and plan to keep it in the 200K-215K range and this will be my situation:

4 CCs -- $0 of $4700

                 $0 of $2500 (Gas Card)

                 $2200 of $5600

                 $4200 of $6500

that utilization will be no where near the 1-9%! my minimum monthly payments though of the two showing balances will be about $170/mo total.

also....

• my salary is/will be $65525
• i will have 9K in savings
• i have student loans at $157/mo
• ...and although when determining preapproval they only look at items listed on the credit report, my only other debt is/will be about $90/mo in car insur. (car is paid off) and $180/mo AT&T bill.
• a few lates, all more than 2 years ago

**credit scores are below**

[Anonymous]

Not a deal breaker but utilization does effect your credit scores and DTI ratio. You meet the score requirement of 620 for FHA so that's fine, don't need to pay the cards down.

The $170 minimum payment will essentially lower the amount you're approved for but probably not by too much. You could play with the online mortgage calculators to find out how much you'll be approved for and if it's lower than you wish, paying off the credit cards would help bump it up a bit

[krielly]

Here's a gut reaction, and remember, JMHO:

Unless you have a 0% interest rate on those credit cards, it doesn't seem to make sense to me for you to have 9K in the bank (which is probably earning next to nothing in interest), but yet have such high Util on those cards. They are costing you money every month........

While it may be true that you don't need to pay them down for a FHA requirement, you should rethink floating those balances month to month if you have the resources to pay them down/off.

K

[Anonymous]

gotcha.  what i'm trying to do is balance paying them down AND saving.  i don't have the 9K now....only about half.  interest rate on both cards is 9%.

[ShanetheMortgageMan]

You should be fine for FHA, debt ratio is OK, utilization isn't really considered when going for a mortgage (only the results of utilization) and utilities aren't included in the debt ratio either (depending on what "utils" you were referring to).