HELP - closing on mortgage Tuesday with conditions - I have to pay/ close ALL my CC accounts???

[bethrn99]

I JUST heard from my LO tonight - I was issued a commitment letter with some conditions. I am closing on Tuesday 3/8/11.  Most of the conditions are no big deal - I need to pay a collection at closing and get a letter notarized. The biggie is that I need to pay off and CLOSE all 4 of my open credit cards. Now I have had these accounts for 10 years, they are all current and in good standing. They all have low limits and low balances. My questions are this:

How hard will it be for me to reopen these accounts once I close on the mortgage?  I am planning on calling the very next day to reopen the accounts.

Has anyone heard of lenders requiring this?  I was told that my DTI ratio is very close and this apparently will make the difference.

Any input is appreciated.

**I was concerned about my credit score dropping due to the closed accounts but my LO said that they already did the final credit report pull and they will just do a tradeline verification to confirm that the accounts are closed right before closing.

[Anonymous]

Whya re they requiring it.  IT seems like a bad idea.  Is DTI that tight that they are going need the extra couple dollars per month for these low credit lines.  If the accounts are in good standing and have been so there is no good reason to close them and many bad reason to avoid doing so (except the obvious DTI as mentioned above).  I would have the LO refer this back to the UW with clarification as to why it needs to be done.  Once you close the accounts and the mortgage reports you make take some FICO dings and your score drop, plus creditors are alot tighter with issuing credit so you stand a real chance of not being allowed to re-open the credit lines once they have been paid off.

[ShanetheMortgageMan]

The reason this needs to be done is because in order to pay off revolving debt in order to qualify, the accounts also need to be closed or else the underwriter will just think they are going to be used again/just being paid off in order to qualify for the mortgage.

I believe it'll be very difficult, if not impossible for you to re-open those accounts once closed.  You should call them and ask before closing them.

Personally I think you should look into other ways to reduce your debt ratio... perhaps instead of paying off the credit cards, you buy the rate down .125%, or you put more money down.