topic Re: New Credit Cards before Mortgage Loan in Mortgage Loans

New Credit Cards before Mortgage Loan

Anonymous — Mon, 30 Jan 2017 22:11:52 GMT

We recently decided to go for home purchase (first time buyer) as interest rates are expected to climb this year. Looking for $700K loan on around $850K purchase price. My EX/EQ/TU FICO is 720 ~730.

However I have 4 HP's / 4 new credit card accounts (Chase Saphire, Cap1 Venture, PenFed, Citi Costco) in the last 3-4 months, all approved with total credit limit of around $75K, applied them mostly due to 0% Balance Transfer/travel points/etc when I had no intention of house purchase at that time.. Due to huge available credit my util went below 3% from 20% and mean FICO 8 score from 3 beruaus at around 720 (came down slightly from 740 due to AAoA pulling down for new accounts while offsetting low util benefit). I have just about 6 months more payments remaining on Auto Loan.

Would like to know how lenders look into the recent / new credit card accounts when underwriting the mortgage loan. Will I be approved at all, or should I wait for like 6 months or so before I can apply for my first mortgage. Thanks

Re: New Credit Cards before Mortgage Loan

ShanetheMortgageMan — Mon, 30 Jan 2017 23:27:51 GMT

In your situation an underwriter would probably just ask why so many new accounts were opened. Based on the reason you provided, it'd be unlikely to have an actual impact on your approval chances. However, with a loan amount above the conforming loan limit (not sure where you are, but for example in Los Angeles/San Francisco/NYC areas it'd be $636,150), you'll want to have scores of at least 740-760 to have the most options at the lowest rates. If you can muster 20% down then your options will really open up.

Re: New Credit Cards before Mortgage Loan

Anonymous — Tue, 31 Jan 2017 17:59:32 GMT

Thank You

Yes, working towards 20% downpayment plus clearing all credti cards due ($0 balance) before I apply for Mortgage. This makes $0 monthly payments that have impact on credit report. Hope my FICO would slightly improve when util becomes 0%

Re: New Credit Cards before Mortgage Loan

Anonymous — Tue, 31 Jan 2017 18:29:41 GMT

This may sound crazy, but leave 2$ on one of your balances while paying the rest if you can. I did this and it boosted my score nicely, got me to right around 720 when I was struggling with getting over 700 with all of the accounts paid.

Mortgage scores favor having 1 card with a balance, but 2$ on a higher limit card would still give you a 0% util.

Re: New Credit Cards before Mortgage Loan

Anonymous — Tue, 31 Jan 2017 20:15:17 GMT

You saying leaving small balance in credit card account indeed helps improve score?? Interesting to know..

Will do that. Thanks

Re: New Credit Cards before Mortgage Loan

ShanetheMortgageMan — Tue, 31 Jan 2017 21:56:27 GMT

@Anonymous wrote:
Thank You
Yes, working towards 20% downpayment plus clearing all credti cards due ($0 balance) before I apply for Mortgage. This makes $0 monthly payments that have impact on credit report. Hope my FICO would slightly improve when util becomes 0%

Also, keep in mind when financing about the conforming loan limit, lenders will generally want you to have 3-12 months of the proposed PITI payment in reserves available after closing.