topic Re: Closed Accts and Applying for Mortgage in Mortgage Loans

Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 17:03:13 GMT

Hi All,

I'm about 9 months out from buying my first home and I plan on getting my credit file in the best shape possible. All of my credit cards are maxed out and I was thinking of closing three of my newest lines and getting on a hardship program with them/paying down the rest. For example, chase offers a 5 year repayment plan with 2% interest. If I close out my accounts with a balance (but still paying them and they don't got to collections) will that look negative to a mortgage lender? Please, all thoughts are appreciated.

Thanks

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 17:22:13 GMT

@Anonymous wrote:
Hi All,
I'm about 9 months out from buying my first home and I plan on getting my credit file in the best shape possible. All of my credit cards are maxed out and I was thinking of closing three of my newest lines and getting on a hardship program with them/paying down the rest. For example, chase offers a 5 year repayment plan with 2% interest. If I close out my accounts with a balance (but still paying them and they don't got to collections) will that look negative to a mortgage lender? Please, all thoughts are appreciated.

Thanks

I would delay buying a home until you're financially healthy and out of debt. If you need to go on a hardship program to do so, so be it, but I think adding a mortgage (and all of the other expenses that go along with it) in 9 months spells trouble.

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 18:47:50 GMT

+1 to what steeler said. It just makes no sense to attempt to take on a mtg. In your current financial situation. Focus on your cc debt right now, worry about the mtg later. Dv

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 18:52:11 GMT

Thanks DV and Steeler. I did forget to mention I plan on paying down cards to about 45% utilization before applying. But since some of these programs offer very low interest and I don't use the accounts anymore anyway, that not having the high apr each month would help by the time I pay the cards off in ~6 months. I make 89k and have 550 in total cc mins and a 367 car note

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 19:22:51 GMT

@Anonymous wrote:
Thanks DV and Steeler. I did forget to mention I plan on paying down cards to about 45% utilization before applying. But since some of these programs offer very low interest and I don't use the accounts anymore anyway, that not having the high apr each month would help by the time I pay the cards off in ~6 months. I make 89k and have 550 in total cc mins and a 367 car note

Hmmmm. Where is the bulk of your $$ going? Do you have crazy student loans or rent? At first glance it seems your CC debt should be no issue on your income. (but I know we all have different things going on!)

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 19:35:55 GMT

Rent is high at 2k. The income is new. I was making 71k and just got a raise for the new income of 89k. Student loans are manageable at the moment but will put them on deferment before applying for the loan so they won't get included in my dti

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 19:49:06 GMT

@Anonymous wrote:
Rent is high at 2k. The income is new. I was making 71k and just got a raise for the new income of 89k. Student loans are manageable at the moment but will put them on deferment before applying for the loan so they won't get included in my dti

Can't say that I recommend this.

You're in debt currently because you're house poor. A lease is one thing when you can move (which I highly recommend doing so you can get out of debt) - in with family, to a cheaper rental, with a roommate, whatever but buying a house is a much bigger deal. Hiding obligations could get you in a loan you can't afford and repeat your current problem on a much bigger scale.

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 19:54:25 GMT

Thanks steely. I don't intend on getting a expensive home. I'm looking at homes sub 250, for a payment around 1100-1200. I have no family/friends to move in with and rent is very high where I live in comparison to owning a home.

Re: Closed Accts and Applying for Mortgage

Anonymous — Fri, 08 Sep 2017 22:33:27 GMT

@Anonymous wrote:
Thanks steely. I don't intend on getting a expensive home. I'm looking at homes sub 250, for a payment around 1100-1200. I have no family/friends to move in with and rent is very high where I live in comparison to owning a home.

The mortgage on a $250k-ish home will be $1100-$1200. What are the property taxes? 6k/year is an extra $500/month. Is it a condo or townhouse? Monthly Maintenance Charges? An extra $500/month. Repairs and Maintenance? Insurance? Suddenly your purchased home costs more than your rental.

Just make sure you list out *everything*. I've never known saving $800-$900/month vs. renting to be the bottom line.

Re: Closed Accts and Applying for Mortgage

Anonymous — Sat, 09 Sep 2017 22:53:42 GMT

@Anonymous wrote:
Rent is high at 2k. The income is new. I was making 71k and just got a raise for the new income of 89k. Student loans are manageable at the moment but will put them on deferment before applying for the loan so they won't get included in my dti

Keep in mind... Regardless of if the loans are in deferment or not, they will still be counted in your DTI.

Re: Closed Accts and Applying for Mortgage

StartingOver10 — Sat, 09 Sep 2017 22:56:19 GMT

OP, there are a few things that should be considered. For example, closing your cc accounts with a balance will absolutely tank your scores. Going into a hardship program will also tank your scores. The very first thing you should do is put a buget together. Your money is leaking out somewhere plus you have a higher rent. But as pointed out it could be more to own a house with a mortgage when you include the other expenses such as homeowners insurance, mortgage insurance, property taxes, maintenance fees and repairs. Please take the time to research what factors influence your scores. Looking at the Understanding FICO Scoring section will help you for that portion. Don't close your credit cards yet without determining the huge negative impact it will have to your scores. Then put together a buget. Next, talk with HR to see if you can modify your withholdings.

Re: Closed Accts and Applying for Mortgage

Anonymous — Mon, 11 Sep 2017 08:38:49 GMT

You can easily end up over 2k a month for a mortgage for a $250k house. And then you have all the maintenance that goes with it.
In my area property taxes on homes for $250 range from $6-9k.