But I Pay Off My Credit Cards Monthly

December 1st, 2014

credit cards

Some clients get a bit frustrated that minimum monthly credit card payments are counted against them in their debt ratios. They feel if they pay off their credit card bills every month no payment should be counted against them. First, the underwriter can’t assume that the client pays them off every month. Second, if you are spending about $3,000 every month on your credit cards for example, assume you usually pay that amount off every month. And the minimum monthly payments are $150 a month, but you pay off the balance each time. It seems pretty fair if you are spending $3,000 a month to only count $150 a month against you in your debt ratios.

Also, it is revolving debt. And revolving debt can be left open ended with balances that can stay outstanding forever. So it makes sense to count something against the consumer in their debt ratios. What if one month you run up your credit card bills more than you have before, and can’t pay off the balance like you usually do? The credit card company allows that. So a lender needs to account for that possibility.

A minimum monthly credit card payment doesn’t hurt your debt ratios that much anyway. The effect is minimal. If you are buying so much house and getting a high enough mortgage that your minimum monthly credit card payments are eating into the mortgage amount that you can qualify for, then you may want to reconsider the mortgage loan amount.

So please realize that even when you pay off your credit card bills every month, some small amount will be counted against you in your debt ratios. This seems a pretty fair assumption for mortgage lenders to make.

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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