In previous posts I’ve mentioned lenders are slowly loosening the death grip they have on credit guidelines. Just this week more lending guideline enhancements were recently released from Fannie Mae and Freddie Mac and it will be interesting to see which lenders jump on board first. I say that because lenders can still impose their own guidelines (they are known in the lending world as “overlays”) on top of the base Fannie/Freddie guidelines. Competition will ferret out the ones willing to follow suit with the big government sponsored enterprises.
One of the best enhancements from the recent release is that credit cards can be paid off and remain open. This allows consumers to pay off credit card debt to help them qualify for their home loan or boost their purchase power without closing well-established accounts. Until now borrowers have been able to pay off revolving debt like credit cards and home equity lines but they were required to close them as well. On the surface this may not seem like a big deal. After all, not a day goes by without receiving a new credit card offer in the mail box or inbox. But this is a big deterrent for anyone who has a long established account in good standing because closing an account with good history means you are also closing that long established history. Opening the new account means starting over.
If you’ve ever asked yourself, “Self, how much more home can I buy by paying off my credit cards?” click back there.
By David Hughson
Mortgage Planner With a Plan