Credit Clean Up During Mortgage? (insurance, loans, credit score, fee)

[awayinco]

Long story short, hubby and I are interested in buying a house. I emailed a mortgage consultant today and explained my basic situation to them. I've got some credit flaws that I'm working on clearing up, and so does hubby. However, we have stable jobs (albeit new jobs...each less than a year) and make good income. The consultant called me back to review the information I sent him, and he said he thought he could help us get into a home.

Went ahead and started the application process, and he pulled our credit. Hubby's flaws, combined with his very short credit history, made him a no-go. But, it looks like my credit score and income ratios will qualify me...with a couple conditions. I need to be enrolled in school. No big deal, since I've already been accepted into my Masters program and it begins mid-August. Secondly, I have three accounts in collections, and he wants me to pay them off. Which can be done in the next 30 days, so that is not an issue. He then mentioned that we could do two things: he could write letters to the credit bureaus to inform them of payment and try to expidite the clearing of the items from my credit, or I could use a credit counseling-type service they have in their office. While I have heard of these services before, this is my first go at a mortgage, so I'm unsure if this is a common practice or not.

He then said it'll take a month or two for the collections to be reported as paid, and then we will move forward without those flaws counting against me for the mortgage.

Does this sound like a common practice for people with flawed credit? Maybe it's silly to ask, but I don't know anyone who has dealt with mortgages and credit flaws, so I don't think I can be too careful.

[rational1]

Someone with problematic credit and a short time in present job should only be able to get a mortgage on unattractive terms (high rate, high downpayment, mortgage insurance, etc.). Because you are describing a risky borrower. I thought these risky loans were history after the financial crash.

I wonder if your "consultant" is asking for money in front? Or if he is going to ask for money?

[jmc912]

You can do it yourself, you don't need anyone to help repair your credit...

Go check out the rebuilding forums on MyFico.com.... you will find a WEALTH of information and step by step directions on how to get collections removed from your report. You can usually negotiate with the collection agency a pay-for-delete agreement.

I was able to do this with my husband... Started 3 months ago with his score of 505 and got about 10 collections removed and now his score is 760.

The professionals don't do anything that you can't do.

[awayinco]

He's not asking for any money up front. He mentioned the company as an option if I wasn't comfortable doing it myself, but I have no problem putting in my own legwork. Thank you jmc for the information on MyFico. I will certainly look into it!

[Pfhtex]

A Rapid rescore generally costs $18 per tradeline per account, and takes about a week, although lenders tend to say 3 business days. Usually I recoup this fee at closing. Hopefully, your lender will be as surgical as possible so as to get the most bang for your bucks and not overspend your money.

[awayinco]

Thanks Pfhtex! That's what he called it yesterday and I could not remember what it was! He told me there would be a small fee per account to get them handled, but I could not for the life of me remember what the name was.