The American Express Payment Problem

Part of the mortgage qualification process includes what is called your debt to income ratio (DTI). This your gross monthly income divided by the lump sum total of your proposed housing payment and any other monthly obligations that show up on your credit report. This would include car payments, student loan payments (this links to our other post on these payments), and minimum payments on any revolving charge cards. These are typically a very small percentage of the outstanding balance.

Recently that has changed with several versions of the American Express card. They now are offering a service called “Plan It”. This allows you to spread your payments out over time. They will typically offer you the option to pay it over 3, 6, 12 or 18 months at a fixed rate, depending on your history with them. The net effect of this is that it raises your minimum monthly payment significantly. This is increasing clients’ DTI ratio (debt to income) in many cases to the point where they no longer qualify for a mortgage.

The bottom line is that how you manage your outstanding monthly debt can make a big difference on whether you can qualify for a mortgage. We’re only a phone call away if you have any questions.

Happy House Hunting!