Credit Card Debt and Mortgage / Home Loan Approval

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Credit Card Debt and Mortgage / Home Loan Approval

Postby tlocke » Sat Oct 02, 2010 11:09 pm

I am in the mist of getting loan approval on a home. We have received a pre approval for a specific amount. I was told I needed to reduce my monthly payments to keeps this pre-approval. I paid off two student loans and one credit card. These loans and card have always posted to my credit report on the last day of the month. However, it is not the 2nd and nothing has posted from September. In order for underwriter to approve loan, these have to post showing no balance. Do credit companies post late and back date it? Any suggestions? This is very stressful.

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Postby Generallisimo » Sun Oct 03, 2010 5:34 am

I think it can take anywhere from a few days to 2 weeks for balance information to be reported to and then updated by the credit bureaus. They definitely do not have a "live" system in effect with real-time updates, that would just be too expensive to implement. Another thing to keep in mind is that it is not the end of the month, but the end of your credit card billing cycle that the information will probably be sent. Additionally, even if you zero out the balance before the end of the month, sometimes the information reported to the credit bureau is the "high" balance information. I would say wait until after the 10'th and check again, if it still shows, then it is probably because they are reporting the high balance. I guess time is not a luxury, but if it is the case that the high balance is reported, then just do not use cards for a full month and try again. But then again, we're taking about a 30-year commitment, if you're not able to wait another month, maybe it is not worth the stress? Given the current market conditions, I wouldn't consider any failure to buy a particular house right now a big loss considering the large amount of opportunities that are available.

On an unrelated note, I heard from someone who went through the application process recently that when their application was reviewed, all of the available credit was considered "debt." It actually makes sense to me since that credit could easily be turned into debt with a few large purchases. Anyway, it was necessary to lower the available credit in order to qualify. So if you do have some really high credit limits, that might be something else to consider (at least when applying). I am not sure by what amount that needs to be lowered, so just ask the lender.

Good luck.

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Postby Mogul of Pineapples » Tue Oct 05, 2010 4:49 pm

That's a great answer Generallismo. Something else that may cause a delay is that some creditors don't report to all 3 bureaus, because each account reported costs them money. They may report to only one and then the other two will pick up the data from it within a couple months so eventually being shown on all 3.

On an unrelated note, I heard from someone who went through the application process recently that when their application was reviewed, all of the available credit was considered "debt."

During the real estate bubble I remember they were saying the higher limit your credit cards were, the better. I guess now that concept has been turned upside down. The one thing that has remained constant is that credit card debt and mortgage application at the same time is never a good idea. But now that definition of what's considered debt has apparently been expanded.
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