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Originally Posted by Cecil Terwilliger
So which part do you strongly disagree with me on? I'm confused. Everything you posted is almost verbatim what i posted already. And what's more confusing is how you could possibly disagree that open credit at zero balance is WORSE than actual debt.
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Or if he has $40k in open credit and refuses to close it to get the loan approved then who's fault is that?
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Cecil
i think Pizza's reasoning had more to do with this:
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They will always consider the worst case scenario where if you decide to max out your credit facilities like your Credit cards and LoCs, they want to know if you're able to pay back their loans as well.
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this is from my own personal experience 6 or 7 years ago when my wife and i were in the process of getting our house built ...
we met with the banker/mortgage guy to see how much of mortgage we would qualify for. after crunching some numbers he told us we would be able to get 'x'. if we wanted more, one thing we could do is close the $20K line of credit we had (we originally got the LOC shortly after buying our first place, paid it all off to a zero balance just let it sit there for 5 years)
i'm no banker but i think their thought process is something like this:
- bc-chris & his wife have this much income and they can safely afford 'x' dollars to be paid to debt every month
- they currently pay/have available 'y' dollars every month for current debts (CC's, LOC's, etc)
- so they can afford a monthly mortgage payment of x-y, which translates into 'so much' over 20 years (again.... very simplistic example)
but the more credit you have available to you the more you can potentially owe every month, and that can affect how large of a mortgage you are able to get approved for.
we ended up toasting the LOC and 1 credit card (one that we never used), thus reducing the 'potential debt' we could acquire. as a result we were able to increase our mortgage