How do Open Charge Cards (AMEX) impact my debt ratio?

Traditional revolving credit cards in which your credit continually revolves month-to-month have a varying impact on your debt ratio. It really all depends on the balance of the credit card when a lender pulls your credit. An open charge card, such as an AMEX, is very different. Open charge cards must be paid off in full each month.

So for instance, if you typically charge $10,000 to your open charge card each month, but always end up paying it off, do you have to factor in the $10,000 monthly payment to your debt ratio? The answer is generally: No, provided you’re able to prove you can afford this debt, as well as satisfy a few other requirements. See below:

• Fannie Mae (Conventional): You can omit this payment from your debt ratio provided that you have bank statements showing sufficient liquid funds to pay the balance in full.
• Freddie Mac (Conventional): You are allowed to factor 5% of the balance of your open charge card as a payment into your debt ratio. If you want to exclude this payment from the debt ratio, you must provide bank statements showing sufficient liquid funds to pay balance in full.
• FHA: Contact a mortgage expert for more info.
• USDA: Contact a mortgage expert for more info.
• VA: Contact a mortgage expert for more info.

Blue Water Mortgage is licensed in New Hampshire, Maine, Massachusetts, Connecticut, Florida, and North Carolina.

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