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payoff debts
Why does a client has to close off the credit card account after she paid off her credit card to lower her DTI ratio?

Fannie Mae requires that if you pay off an activate credit card account to offset the monthly debt obligations to qualify for a mortgage loan's debt to income ratio requirements, that you close out the credit card account after you pay off the balance and have a credit supplement done so it reflects it on the borrower's credit report. The reason this is done is so that the borrower does not go and charge up the credit cards again after closing. The borrower can re-open the credit card account after closing. If you think there will be an issue with debt to income ratios due to high balance on credit card accounts, have the borrower pay off the balance of the credit cards and make sure the credit report reflects zero balance before the mortgage applicant applies for a mortgage application. Freddie Mac is different. Freddie Mac will allow mortgage borrowers to pay off credit card balances and not close out their credit card accounts. Here is an article related to this top:



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