Boca Raton, FL (PRWEB) October 31, 2012
When consumers are carrying high balances on credit cards with high interest rates they find themselves in a position where they get turned down for mortgages and refinancing. This is due to the high debt to income ratio even if the consumer is current on all accounts and has a relatively good credit score. A specialized debt management program can help to get applicants in this position approved even before they pay off the balances they are carrying. When applicants for mortgages and refinancing are not only carrying high balances on credit cards but the credit cards have high interest rates they are viewed by lenders as more “high risk” because with the high interest rates they have they could be paying on the credit card accounts for an extremely long time.
In addition to the fact that they are carrying these high interest, high balance accounts, they may also be viewed by the prospective lender as having too many open accounts that could lead to further debt. For example, a $10,000 Chase credit card account at 24% APR with a fixed monthly payment of $200 per month would take approximately 18 years to pay off. By reducing the interest rate on this Chase account to the 6% that Chase offers in the debt management program the account would be paid off in 4.8 years with interest savings of over $32,000. Based on these figures it is easy to see why a lender would be concerned about a prospective borrower that could be paying on their existing accounts for periods as long as 18 years. However, by drastically reducing the time that it takes to pay off these accounts, this shows a “light at the end of the tunnel” that makes the loan less risky to the lender.
The following tips on utilizing a specialized debt management program to correct this can result in mortgage approval sooner while also paying off the high interest credit card accounts sooner.
Tip #1. FIND A FIRM THAT HANDLES CLIENTS WITH GOOD CREDIT
Firms that handle more sophisticated clients with good credit are few and far between but they do exist. Make sure the firms you inquire with have experience in handling current accounts and know how to keep them current during the transition from direct payments to creditors and payments through the debt management program.
Tip #2. DON’T CONFUSE DEBT SETTLEMENT AND DEBT MANAGEMENT
Be sure you find a “Debt Management” program where all accounts are paid in full. A “Debt Settlement” program will not be right for you.
Tip #3. MAKE SURE THE WRONG ACCOUNTS ARE NOT INCLUDED
There are a few creditors that report accounts in a debt management program as in “collections”. If you are dealing with a firm that handles clients seeking mortgage approval they will know who these few creditors are and advise you not to include them.
Tip #3. ADJUST YOUR DUE DATES TO COINCIDE WITH ONE PROGRAM PAYMENT
When you enter the debt management program you will be making one payment for multiple accounts. Make sure all of your accounts are being paid on or before their due dates to avoid any late reporting.
Tip #4. LEAVE SOME ACCOUNTS OPEN
Try to leave a few of your smaller credit card accounts open so you have lines of credit current and paid as agreed still contributing to your credit score. If you encounter a firm that requires all accounts to be included you are not dealing with the correct firm to accomplish your goal of mortgage approval.
Tip #5. MONITOR STATEMENTS DELIGENTLY
Monitor your statements after your accounts have been accepted on the debt management plan especially in the first 2 months. When transitioning from direct payments to program payments, the new accepted minimum payments may be lower than what you were paying before. The difference between your required payments and the new program payments may have small amounts that carry over as “Past Due” in the first month or 2. If this is the case get the past due amounts paid so no negative reporting takes place as a result of this.
TIP #6. MAKE SURE THE FIRM IS EXPERIENCED AT PROVIDING LETTERS TO MORTGAGE LENDERS TO GET YOU APPROVED
Once all of your accounts are accepted and you are paying them down faster you can go and apply again for a mortgage after a 6 to 12 month transaction history with the debt management program. Lenders almost always ask for a letter from the debt management firm detailing your new rates, what accounts are included and how long they will take to pay. The right firm will know what the lenders are looking for and will be able to provide this for you.
For more information on debt management visit http://www.debtsynergy.com