Should I pay off a credit card then apply for a mortgage?

I get this question all the time! Usually, the answer is no. Credit bureaus are the ones who report on your credit score, and if you've ever tried improving your credit, you know how long the process can take. This is because some bureaus only update their records once a month or even once per quarter.

So, if you pay off your credit card on Monday, and apply for a mortgage on Wednesday, it is still going to show a balance when your credit is pulled (whether it's a soft or hard pull, it doesn't matter). It will not be updated in the system to show zero balance, so for initial qualification, it doesn't make any difference.

When does it make sense to pay off a credit card during the home loan process?

Let's say we go through the qualification process and your credit score is too low to qualify. Well, a great option is to do what we call a "re-score" which means you pay off a specific amount on individual liabilities to bump up your score within a week. This process involves paying off the liabilities (and we have technology to tell you exactly what to pay down to the penny on what liabilities), uploading statements showing the new balance, and then a credit advocate submits the information to the bureaus and has them generate an updated score based on what we just did.

Another scenario: I review your initial loan application and your debt to income ratio is too high, so we pay off a liability to qualify. This gives us more "money" on a monthly basis to put towards your new mortgage payment and yields acceptable ratios for your file. In this case, we can submit documentation showing the liability has been paid off to the underwriter and we're good to go!