Paying off your credit cards prior to applying for any home mortgage loan is always a good idea, however it’s very common that a borrower will learn in the middle of the loan processing that they may need to lower their debt-to-income ratio in order to better qualify for the mortgage loan. More often than not, a broker will recommend the best way to do this is to pay off past credit card debt.
But — while paying off your credit card is always a good idea, you may also have to close the credit card account in order to qualify for a mortgage loan. Conventional mortgage products allow you to maintain a credit card account after payoff, however other unconventional mortgage products do not. See below:
Getting your financial house in order shows a lender that you’re responsible and financially capable of handling further debt. To learn more tips and advice on how to fix your credit before buying a home, read this blog post: How to Repair Poor Credit Before Securing a Home Loan.