Mortgages: Pay Off Credit Cards Before Applying

Are you planning on applying for a mortgage within the next few months? Then it would probably be best to pay off your credit cards before applying. Kara, an editor at CreditCardForum.com, shares with us why it’s so important…

Now more than ever, lenders are extremely cautious when it comes to approving loans for large amounts (i.e. mortgages). Basically, they want to make sure you will have the financial resources to pay back the loan. What’s equally important is for them to trust that you have the financial discipline to pay it back. After all, there are plenty of rich people in this world that still manage to go broke despite their wealth.

So when it comes time to apply for a mortgage, you want to demonstrate that your financial situation is going well. If you apply and have credit cards that are maxed out… how do you think that will look? It will basically say you don’t have the ability to manage small debts, so how can they trust you with a mortgage for hundreds of thousands?

This is why it’s often recommended that you pay off your credit cards around six months before applying for your mortgage. Why six months? Well, sometimes it takes a while for your credit card companies to report the information to the credit bureaus. Therefore, it’s best to pay them off a few months in advance, to ensure it’s reflected on your credit file when you apply.