topic Re: DTI Help with Credit Cards? in Mortgage Loans

Closing Credit cards before buying a home?

Anonymous — Thu, 06 Apr 2017 19:59:48 GMT

I'm trying to obtain a mortgage in 1 year and I need to lower my DTI

Which Cards should I close ?

Captital one $700 Balance / Limit $800 OPENED 2013
Capital one $400 Balance / Limit $550 OPENED 2015
Credit One $580 Balance / Limit $700 OPENED 2016
Discover Secured card $0 Balance/ Limit $200 OPENED 2017

Amazon Store Card $0 Balance / $700 Limit OPENED 2017
Walmart Store Card $0 Balance / Limit $900 OPENED 2017
OVERSTOCK Store Card $123 Balance / Limit $550 OPENED 2016
Victoria Secret Store Card $64 Balance/ Limit $550 OPENED 2016
Pottery Barn Store Card $162 Balance/ Limit $750 OPENED 2016
Full Beauty Store card $100 Balance Limit $250 OPENED 2016
Simply Be Store card $0 Balance / $250 Limit OPENED 2016
The LOFT Store card $0 Balance / $250 Limit OPENED 2016

I'm going to snowball the credit cards but I want to know which cards should I close to help lower my DTI drastically.
Ficos are EXP 672, TU 654, EQ 614
$35k In student loan Debt and a $25k Auto loan

Re: DTI Help with Credit Cards?

Anonymous — Thu, 06 Apr 2017 20:05:21 GMT

@Anonymous wrote:
I'm trying to obtain a mortgage in 1 year and I need to lower my DTI
Which Cards should I close ?
Captital one $700 Balance / Limit $800 OPENED 2013
Capital one $400 Balance / Limit $550 OPENED 2015
Credit One $580 Balance / Limit $700 OPENED 2016
Discover Secured card $0 Balance/ Limit $200 OPENED 2017
Amazon Store Card $0 Balance / $700 Limit OPENED 2017
Walmart Store Card $0 Balance / Limit $900 OPENED 2017
OVERSTOCK Store Card $123 Balance / Limit $550 OPENED 2016
Victoria Secret Store Card $64 Balance/ Limit $550 OPENED 2016
Pottery Barn Store Card $162 Balance/ Limit $750 OPENED 2016
Full Beauty Store card $100 Balance Limit $250 OPENED 2016
Simply Be Store card $0 Balance / $250 Limit OPENED 2016
The LOFT Store card $0 Balance / $250 Limit OPENED 2016

I'm going to snowball the credit cards but I want to know which cards should I close to help lower my DTI drastically.
Ficos are EXP 672, TU 654, EQ 614
$35k In student loan Debt and a $25k Auto loan

I would pay down and close these:

Victoria Secret Store Card $64 Balance/ Limit $550 OPENED 2016
Full Beauty Store card $100 Balance Limit $250 OPENED 2016

I woud just close these:
Simply Be Store card $0 Balance / $250 Limit OPENED 2016
The LOFT Store card $0 Balance / $250 Limit OPENED 2016

and then pay down and combine :

Captital one $700 Balance / Limit $800 OPENED 2013
Capital one $400 Balance / Limit $550 OPENED 2015

and then pay off and close:

Credit One $580 Balance / Limit $700 OPENED 2016

Along with cli when ever possibe (Walmart, Capital One, Overstock, Amazon )....

Re: DTI Help with Credit Cards?

Anonymous — Thu, 06 Apr 2017 20:06:25 GMT

On another note....0 balance credit cards don't count towards your DTI....

Re: Closing Credit cards before buying a home?

sarge12 — Thu, 06 Apr 2017 20:11:49 GMT

@Anonymous wrote:
I'm trying to obtain a mortgage in 1 year and I need to lower my DTI
Which Cards should I close ?
Captital one $700 Balance / Limit $800 OPENED 2013
Capital one $400 Balance / Limit $550 OPENED 2015
Credit One $580 Balance / Limit $700 OPENED 2016
Discover Secured card $0 Balance/ Limit $200 OPENED 2017
Amazon Store Card $0 Balance / $700 Limit OPENED 2017
Walmart Store Card $0 Balance / Limit $900 OPENED 2017
OVERSTOCK Store Card $123 Balance / Limit $550 OPENED 2016
Victoria Secret Store Card $64 Balance/ Limit $550 OPENED 2016
Pottery Barn Store Card $162 Balance/ Limit $750 OPENED 2016
Full Beauty Store card $100 Balance Limit $250 OPENED 2016
Simply Be Store card $0 Balance / $250 Limit OPENED 2016
The LOFT Store card $0 Balance / $250 Limit OPENED 2016

I'm going to snowball the credit cards but I want to know which cards should I close to help lower my DTI drastically.
Ficos are EXP 672, TU 654, EQ 614
$35k In student loan Debt and a $25k Auto loan

Those credit limits are all so low I can't see closing them making a huge difference in DTI...The total credit limits are only about 6500 from a quick calculation in my head. Did a mortgage broker say your DTI would be helped drasticly by closing the cards?

Re: Closing Credit cards before buying a home?

JediNeo — Thu, 06 Apr 2017 20:14:23 GMT

You do not have to close a card, but reduce or zero out the balance. DTI will calculate the minimum payment due for the card. So if the card has a zero balance it will not be factored into your DTI calculation. That said, looking at your list, it appears you are close to maxing out a number of cards. Focus on getting the balances down.

Re: DTI Help with Credit Cards?

irunfromcredit — Thu, 06 Apr 2017 20:17:34 GMT

+1 what the above poster mentioned. I believe 0 balance on cards don't count against your DTI.

But I wonder what, if any a large amount of available revolving credit could impact mortgage chances....

Re: Closing Credit cards before buying a home?

Anonymous — Thu, 06 Apr 2017 20:18:21 GMT

She said paying them off would help my scores jump but I thought maybe closing the cards would help too after being paid off.

Re: Closing Credit cards before buying a home?

Anonymous — Thu, 06 Apr 2017 20:22:01 GMT

Ok thank you I will work on getting the balances paid down.

Re: Closing Credit cards before buying a home?

JediNeo — Thu, 06 Apr 2017 20:24:29 GMT

She is correct. The high utilization on a number of cards to hurting your score. If you feel you no longer need the card you can close it, but closing it will not help boost your scores.

Re: DTI Help with Credit Cards?

Anonymous — Thu, 06 Apr 2017 20:25:33 GMT

Thank you so much!! I'm going to do the plan you recommended.

Am I able to get my mortgage scores from Myfico? I can see your listed under your cards.

Re: Closing Credit cards before buying a home?

sarge12 — Thu, 06 Apr 2017 20:27:05 GMT

@Anonymous wrote:
She said paying them off would help my scores jump but I thought maybe closing the cards would help too after being paid off.

From a credit score standpoint, closing cards that have no annual fee is usually not recommended...pay them to 0 and SD the majority of the cards. Let 1 card report balance, mainly before the credit pull...about 10 dollar balance would be enough. You want to show card use but under 9% utilization. Read all catagories in the learn about scores above. Your qualifying score will be the middle score in a three beaureau pull, and that will figure heavily in the interest rate offered.

Re: DTI Help with Credit Cards?

JediNeo — Thu, 06 Apr 2017 20:32:09 GMT

@irunfromcredit wrote:
+1 what the above poster mentioned. I believe 0 balance on cards don't count against your DTI.

But I wonder what, if any a large amount of available revolving credit could impact mortgage chances....

I had two CC with a zero balance and available limits of about $25k total and it did not affect my loan when I closed in Aug 16.

Re: DTI Help with Credit Cards?

irunfromcredit — Thu, 06 Apr 2017 20:34:16 GMT

@Anonymous wrote:
Thank you so much!! I'm going to do the plan you recommended.
Am I able to get my mortgage scores from Myfico? I can see your listed under your cards.

Yes, MyFico provides the score models that are most used for mortgages. I am waiting a month or so to pull the trigger and order my scores. LIke you, I'm in the process of preparing to apply for a mortgage.

Re: DTI Help with Credit Cards?

irunfromcredit — Thu, 06 Apr 2017 20:37:04 GMT

@JediNeo wrote:
@irunfromcredit wrote:
+1 what the above poster mentioned. I believe 0 balance on cards don't count against your DTI.

But I wonder what, if any a large amount of available revolving credit could impact mortgage chances....
I had two CC with a zero balance and available limits of about $25k total and it did not affect my loan when I closed in Aug 16.

Oh, that's good to know thank you!

Re: DTI Help with Credit Cards?

Anonymous — Thu, 06 Apr 2017 20:48:15 GMT

I'm going to wait and get my Fico too in may to give some things some time to update.

Re: DTI Help with Credit Cards?

Anonymous — Thu, 06 Apr 2017 20:48:43 GMT

I appreciate all the great feedback and knowledge given !!

Re: DTI Help with Credit Cards?

austinguy907 — Thu, 06 Apr 2017 21:11:46 GMT

Closing cards won't do much for your DTI.

$0 balances decrease the impact of calculating your maximum loan potential though.

Your Student loan and Car payments will directly impact the maximum mortgage available.

Mortgage DTI calculate in your min payments on accounts that have a balance reporting at the time that they pull your credit for the pre-app for the mortagge.

Being a year out and thinking about these things helps because you can take some measures to put you in the best possible light when going into the process. You have a chane to go ahead and combine things if possible for lower monthly payments. Refi's if needed to reduce monthly payments. Getting your scores up though means you need to payoff things and only carry a small balance on 1-2 cards. Keeping in mind they use your Middle score when factoring the interest rate should be of importance. If you can hit certain break points you can actually get more reductions on certain loans. If you need to consider PMI i.e. less than 20% down then you'll need to be in the 700-720 range to qualify for the option or be pushed into an FHA situation where you end up paying the premium upfront regardless of how soon you hit your 20% equity. PMI vs FHA premiums can vary considerably or be consistent amoung multiple companies. When I was shopping for my 1st mortgage I called several banks/cu's to compare them w/o having them pull credit. PMI was ranging from 110/mo to 150/mo depending on the lender. I stumbled upon one of my CU accounts having better terms on PMI and they were quoting $55/mo which was 50% less or more than the other lenders.

Put in the time when shopping around and maxmize your savings. Another instance where shopping around saved thousands was when I was looking into HVAC replacement. I scheduled 5-6 quotes from different companies after putting in time searching out the wholesale costs on the units I was interested in. The same systems across those companies varied from $4400 to $12K depending on the company.

Re: DTI Help with Credit Cards?

SunriseEarth — Thu, 06 Apr 2017 21:18:04 GMT

@Anonymous wrote:
I'm trying to obtain a mortgage in 1 year and I need to lower my DTI
Which Cards should I close ?
Captital one $700 Balance / Limit $800 OPENED 2013
Capital one $400 Balance / Limit $550 OPENED 2015
Credit One $580 Balance / Limit $700 OPENED 2016
Discover Secured card $0 Balance/ Limit $200 OPENED 2017
Amazon Store Card $0 Balance / $700 Limit OPENED 2017
Walmart Store Card $0 Balance / Limit $900 OPENED 2017
OVERSTOCK Store Card $123 Balance / Limit $550 OPENED 2016
Victoria Secret Store Card $64 Balance/ Limit $550 OPENED 2016
Pottery Barn Store Card $162 Balance/ Limit $750 OPENED 2016
Full Beauty Store card $100 Balance Limit $250 OPENED 2016
Simply Be Store card $0 Balance / $250 Limit OPENED 2016
The LOFT Store card $0 Balance / $250 Limit OPENED 2016

I'm going to snowball the credit cards but I want to know which cards should I close to help lower my DTI drastically.
Ficos are EXP 672, TU 654, EQ 614
$35k In student loan Debt and a $25k Auto loan

DTI is calculated by minimum payments due, not CLs, so closing zero balance accounts won't improve DTI. What you need to do is pay off your balances so that you can eliminate minimum payments due. I'd especially recommend pay off Credit One and closing it.

Other options to consider would include changing your payment plans for your SLs or perhaps refinancing your auto loan.

Re: DTI Help with Credit Cards?

Anonymous — Thu, 06 Apr 2017 21:38:27 GMT

+1...I was also considering getting rid of the potential debt (low limit high APR store cards).

Re: Closing Credit cards before buying a home?

DallasLoanGuy — Thu, 06 Apr 2017 21:35:33 GMT

as a loan officer.... i see no benefit in closing cards