Quick! I need to know about score?

My husband and I have around $7,750 on about 5 credit cards and we are wanting to get a loan from our bank to pay them off so we can buy a house. We have to have a co-signer (we are young and have no ets) which is my dad, but the banker said that wasn't enough, they want to write a certified letter with a check to each of our credit cards to pay them off and close them! I have been told that this (closing that many credit cards at one time) hurts your credit score and looks bad when you want to buy a house. Is this true? Keep in mind that we just finished paying off a loan from them whose monthly payment is higher than this one, we never had ANY problems or late payments. I know that without them being closed it is "unsecured credit" but does this make your credit look bad? Thanks in advance!