credit cards and mortgage

[pineappledaydreams]

How are credit cards calculated when it comes to mortgage loans? Is it the monthly minimum whether the cc is paid off at the time of closing and applying or if they have no balance they arent considered?

[bs6054]

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@pineappledaydreams wrote:
How are credit cards calculated when it comes to mortgage loans? Is it the monthly minimum whether the cc is paid off at the time of closing and applying or if they have no balance they arent considered?

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Good question.  I assumed it was based on balances when the report was pulled.  But looking at my EX report, a lot of cards show 0 balance but show a monthly payment figure  (e.g. Balance $0, Mo Payment $30)  I have no idea where that comes from, and some accounts don't show it.  So maybe this is used in some way?

[pineappledaydreams]

I hope not.

[SnackTrader]

It is going to depend widely based on lender. But I would say in general, your CC debt is included into debt to income calculations at the very least. Usually the minimum payment will be the number used. However, Having a large amount of CC debt is not going to be favorable in the mortgage process as it shows you may be living beyond your means. So if you have debt way beyond the minimum payment, other types of calculations might be used. Again, it largely varies by lender, although I believe there are certain underwriting guidelines used when selling to the secondary market.

[pineappledaydreams]

Okay. Thank you. I should probably close some cards then to help with dti.

[NJTurnpike]

I'm curious about this also.

how much available credit is consider too much in a mortgage lenders risk assesment? Wha'ts a sweet spot to hit? For example, obviously you wouldn't want to show a lender you have $150k available credit lines with $50k income. So where's the sweet spot? 100% of income? 75% of income?

Has anyone had any issues getting a mortgage where a lender told them they had too much in available credit lines?

Logically, I think it's a bit silly really. If your mortgage lender says, hey you have to much availabel credit say 150k compared to 100k income, so you close 3 accounts at 25k a piece, wait two months, tell your mortgage lender, he pulls your report and you now have 75k available credit compared to 100k income. You get your mortgage and reapply for 3 new cards, and within 6 months, you once again have 150% of your income in available credit. Even more ironic, now credit card lenders view you even more favorably because having mortgage debt is considered a positive.

Its all along the same lines as PenFed's infamous "debt pyramiding" denial reason I think. Ironic how PenFed runs regular balance transfer offers to entice you to "pryramid debt" with them, yet will deny you if you look to them like you could "possibly" do such.

[pineappledaydreams]

I am going to speak a mortgage loan officer on friday.Ill let you know

[MovingForward_2012]

For mortgage loans, credit card debt is based on the min required payment. On all my cards, my min payment is $25 so the total required debt that went into calculating the back end DTI ratio is $100.

[MovingForward_2012]

Oops, meant to say $100 total for 4 cards.

[bs6054]

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@MovingForward_2012 wrote:
For mortgage loans, credit card debt is based on the min required payment. On all my cards, my min payment is $25 so the total required debt that went into calculating the back end DTI ratio is $100.

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And how is the min payment determined?  I think that was the original question.  Is it based on outstanding balance (so a $0 balance would have 0) or something else.