How do open charge cards (AMEX) impact my debt ratio?

When applying for an Amex mortgage loan or any home financing, it’s important to understand how different types of credit impact your debt-to-income ratio. Traditional revolving credit cards can affect your ratio based on the balance at the time your credit is pulled. But open charge cards, like those from American Express (AMEX), work differently — since they must be paid in full each month, they’re treated uniquely by lenders.

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): May exclude the payment if you show bank statements with enough liquid funds to cover the full balance.
• Freddie Mac (Conventional): Typically includes 5% of the balance in your debt ratio, unless you provide bank statements showing you can pay it in full.
• FHA, USDA, VA: Guidelines vary — contact a Blue Water Mortgage expert for personalized guidance.