Paying off credit card balances prior to applying for mortgage

[midwestgirl44]

I have about $14K worth of credit card debt I'm focused to pay off/down before I apply for a mortgage next year. I've been carrying balances on these and the history on my reports shows this. If I pay them off and they reflect $0 or @3% in total does that impact the LO decision? For example, I am at $14K now and through the next 12 months I'll be paying that off/down. If they see I've carried a balance for a while, but with a pay down in the last 12 months is that looked upon negatively or are they only concerned with the numbers presented at the time my CR are pulled?Just trying to get a feel for how CC history can play into mortgage approval.

[Anonymous]

Ehhh... I highly doubt it. I was in a similar situation to you almost a year ago (we are currently about to close on our first home) and I was also nervous that the underwriter would see my balance history and it would be a red flag. I had about 4 or 5 cards reporting balances of anywhere from $500 to $8,500, per card. The balances on all cards, aside from one, have all been paid off for a few months and reflect a $0 balance on my credit reports. My balances didn't get brough up once during underwriting and we even applied with my AMEX card reporting a $6,500 balance. I think you'll be fine, but maybe one of the other experts can weigh in.

[DallasLoanGuy]

we will only be concerned with current balance and pmt.

we dont care if you revolved more in the past

[midwestgirl44]

Thank you for sharing your experience!

[midwestgirl44]

Thank you for sharing your feedback! This helps settle the anxiety I had.

[renclan]

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@DallasLoanGuy wrote:

we will only be concerned with current balance and pmt.

we dont care if you revolved more in the past

When they calculate your cc payments for the dti, do they base it on the minimum payment or what you have been paying. I have had high spend, therefore make large payments, but I'm worried they will consider the amount I choose to pay as my monthly costs. We have significantly cut our amount of spend on the cards so that aren't making so many payments to keep the utilization down.

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[DallasLoanGuy]

minimum payment as reported to bureaus.

[Anonymous]

What if your cards have a balance of $9 out of let's say $500?  What are they going to look at as debt? So if you have 5 credit cards. and all of them have balances of $10 or less, the lenders will still calculate all of them with minimum payments due? If that's the case, then having too many credit cards hurts you more than help you.

[midwestgirl44]

I read it that if you don't have a balance there is no minimum payment due since your balance is zero, so would your minimum payment.

[Imperfectfuture]

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@Anonymous wrote:

What if your cards have a balance of $9 out of let's say $500?  What are they going to look at as debt? So if you have 5 credit cards. and all of them have balances of $10 or less, the lenders will still calculate all of them with minimum payments due? If that's the case, then having too many credit cards hurts you more than help you.

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I have several cards.  Only three will carry a balance.  They will only count those three, making my DTI 75 (LOE needs to go out for secured installment loan, since it is paid off with the money in the savings account.  Monthly payment is 11, but I never spend any money from my income).  In order to get mortgage, needed to blow off many 0% terms.  Ah, such is life (the only cards with balances are at 0%.)