$0 balance before getting a hard pull?

[hoang817]

Hello all,

Looking for an FHA loan and would like to know should i paid of my credit cards balance (before statement date) before getting a hard pull? just for debt income ratio. 

fico scores: 650 accross the board

annual income: $110,000 (from 2 jobs each more than 3 years)

debts: $20k auto loan (current) $400/month

student loan: $4500 (current) $50/month

credit cards: $4900 cap1 (current)  and $2500 AMEX (current)

thanks

[ShanetheMortgageMan]

If you are only concerned about your debt-to-income ratio (DTI) then no, there is no need to pay anything down to $0 before credit is checked because once it's paid to $0 the lender can verify the current balance as such as it'd be excluded from your DTI.  You'd also need to provide a paper trail on how you paid the account down to $0 (a copy of your bank statement showing you paid it off would suffice, for example).

However, using the all zero except one (AZEO) method can improve your credit scores.  AZEO is where you pay all revolving accounts to $0 except for one, which you leave a very small balance on (1% of it's credit limit), and you'll get a score boost because a very low credit utilization ratio is better for your credit scores than no utilization.

How much of a sales price are you trying to qualify for?

[hoang817]

North Texas houses are every expensive and i would like 3.5%-5% down for something around $350k-$400k.

thanks

[ShanetheMortgageMan]

Based on your numbers you should be fine to qualify for a $400k sales price with 3.5% down using FHA financing.  Debt to income ratio should be below 50%.  You shouldn't need to pay anything to $0 balance to qualify, but you may still want to consider the AZEO method for a credit score boost.  The difference in FHA interest rates between your current scores and higher scores isn't very significant (about .125% in rate) so you should weigh that out against getting pre-approved now (vs. getting pre-approved after the balance updates).