Refinance question re: current credit card debt (loan, interest rate, approved)

[Greyhnd]

At kind of the last minute, we decided to see if we can refinance (I am unemployed so will just be one salary - which is not normally what we do so it's questionable whether we will be approved).

We do have what I would call small balances on our credit cards currently ($900 on one, $1500 on another, probably similar on third). We had kept up with our balances until the last couple of months when I stopped paying in full each month.

What do they look at - the monthly minimum payment or the total amount due - or both?

Would it be best for me to pay a larger amount on the credit card when they are due next (next week or so)? Or best to just continue as I am, not pay too much, maybe a third or a half of total due, as to leave more money in the checking account as I'm sure they look at that also?

We just started the process - signing the paperwork from the bank today and I can't tell whether they ran a credit report yet or she just filled in the info I told her re: debt. I think probably she just filled in what I told her as one of the forms is permission to release info to the bank.

Or does it not really matter at this point, as they will look everything up rather quickly as soon as we return paperwork I assume, so me paying a credit card next week is not going to register anyway?

[chet everett]

The key is to AVOID NEGATIVES as much as possible. Then consider the effect of which ever card has the highest rate and pay that off COMPLETELY and leave it in a drawer.

It is not a good idea to deplete your cash reserves ESPECIALLY when the household is not as fully employed as normal, but if the interest rates are high then you have to act to stop the foolish outflow of your capital... Ideally you can have several months of cash saved up and lenders like to say at least a few paychecks worth of cash in checking / savings accounts but the WEIGHT of having debt is much more harmful both to your ability to qualify for refi AND your on-going cash situation...

[Greyhnd]

Yes, agree with the debt part, like I said, even with being unemployed, we managed to stay even until the last month or so. And we have savings that we could use to pay the cards in full, it's just that I have to weigh that against the fact of needing the savings for basic bills (ie mortgage, etc.) if the unemployment period drags on too long.

But at this point, assuming they will be pulling credit reports today/tomorrow (and incidentally at least our FICO is still very good - slightly above 800), is it going to affect our qualification for the mortgage whether I pay all or a little off on an existing balance at this point? Do they check them once now and again in a week or two, I guess is my question, because if they are just going to check them tomorrow, for example, then will make no difference whether I pay more now or not, and probably better to leave more money in the checking account.
I guess there a couple of paychecks in the checking account now, and we also have a savings account I didn't mention.

[chet everett]

For a refi their will PROBABLY one pull of your FICO and credit history now and then a confirmatory pull of your entire credit history closer to funding. A high enough FICO now to get the best rates is good, and so long as nothing changes in a major negative way you will likely get the refinancing done in 60 days or less.

Given those likely scenarios I would agree that it is not smart to drop all of your cash into eliminating debt -- you might need it for 'regular' bills.

[Greyhnd]

Thanks, Chet. They are planning to close in about 2 weeks, Dec 18, so this seems very fast to me. It is not a 'no document' loan like we had last time for purchase; this time we have to supply W2s, paystubs, bank records, etc.
I think given the short timeframe and the fact they are probably already pulling records, I will make small payments on credit cards in the next few weeks, just kind of keep things as they are, probably better to be able to show money in the bank account at this point.