Closed Accts and Applying for Mortgage

Anonymous · ‎09-08-2017

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

Anonymous · ‎09-08-2017

@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.

Anonymous · ‎09-08-2017

+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

Anonymous · ‎09-08-2017

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

Anonymous · ‎09-08-2017

@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!)

Anonymous · ‎09-08-2017

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

Anonymous · ‎09-08-2017

@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.

Anonymous · ‎09-08-2017

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.

Anonymous · ‎09-08-2017

@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.

Anonymous · ‎09-09-2017

@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.