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My husband and I are finally in a position where we think we will finally be able to purchase a home. Unfortunately my husband went through a very nasty divorce about 6 years ago and his credit went into the toilet. We were married 4 years ago and our combined credit history is good to excellent for that time frame. (No new collections and only 1 "thirty day late" payment reported on established revolving credit lines). We are researching both FHA and conventional mortage options but I have some questions........ I've been told by one person that to qualify for FHA all collection account must be settled, no matter what the age of the debt is. Another person said that is true only if the debt is less than 2 years old. Can anyone tell me which is true? Also, I've heard that in this market you MUST have 20% down to qualify for a conventional because the mortgage insurance market has completely dried up. We have over $22,000 saved for down payment and closing costs but are interested in homes in the $250K range. Are we just dreaming that we can get our own home at this time? I don't want to put in an application for a mortgage and risk having a turn down on our report until I understand a little better what the rules are. Thanks!
FHA doesn't require all collections to be paid off.
They require all JUDGEMENTS to be paid off.
They MAY require collections to be paid but it depends on the collections.
How much are they collectively?
Are there any medical collections? How much?
How much is the highest collection amount, and what was it for?
How old is the newest collection, and for how much?
Quote:
Originally Posted by Va-Cat
My husband and I are finally in a position where we think we will finally be able to purchase a home. Unfortunately my husband went through a very nasty divorce about 6 years ago and his credit went into the toilet. We were married 4 years ago and our combined credit history is good to excellent for that time frame. (No new collections and only 1 "thirty day late" payment reported on established revolving credit lines). We are researching both FHA and conventional mortage options but I have some questions........ I've been told by one person that to qualify for FHA all collection account must be settled, no matter what the age of the debt is. Another person said that is true only if the debt is less than 2 years old. Can anyone tell me which is true? Also, I've heard that in this market you MUST have 20% down to qualify for a conventional because the mortgage insurance market has completely dried up. We have over $22,000 saved for down payment and closing costs but are interested in homes in the $250K range. Are we just dreaming that we can get our own home at this time? I don't want to put in an application for a mortgage and risk having a turn down on our report until I understand a little better what the rules are. Thanks!
FHA doesn't require all collections to be paid off.
They require all JUDGEMENTS to be paid off.
They MAY require collections to be paid but it depends on the collections.
How much are they collectively?
Are there any medical collections? How much?
How much is the highest collection amount, and what was it for?
How old is the newest collection, and for how much?
Collectively they are approx $17,000.00. There are a few small medical collections (less than $200.00) The amount is made up mostly by 3 items. One for $8,900.00 for the balance on a repo'ed vehicle in 2002. (This one is more involved as we entered a settlement arrangement with them that they are now not recognizing...we are disputing it. It is still on his report but shows as disputed) There are two credit card balances that make up the majority of whats left of the collection amount. (Largest one for $7640.00 drops off due to SOL in November) The Repo is the highest and the newest is from 2004 for $386. Nothing on his report has gone to a judgement and we have no new collections later than February 2004.
The repo maybe a huge concern for the lender. They may require you to pay it off since it can more than likely end up in judgement.
Since you started a payment plan with the repo, you have now restarted the SOL
I have documentation of the settlement offer letter and check copies that support that the full settlement amount was paid in the time frame negotiated. What I do not have is a final release letter from them and they are refusing to give us one. I even have taped conversations and phone records that support that it has been safisfied. Wouldn't this carry some weight with a lender? We spoke with an attorney and was advised not to pay them anything else or it would negate the settlement. We have contacted the reporting agencies with our documentation to have it removed but have not gotten the determination back yet. Quite frankly, we do not want to give them one more cent since we satisfied our obligation as was negotiated.
Lenders may take the settlement if the documents were new.
Since they're old the lender is going to wonder why it wasn't removed.
Quote:
Originally Posted by Va-Cat
I have documentation of the settlement offer letter and check copies that support that the full settlement amount was paid in the time frame negotiated. What I do not have is a final release letter from them and they are refusing to give us one. I even have taped conversations and phone records that support that it has been safisfied. Wouldn't this carry some weight with a lender? We spoke with an attorney and was advised not to pay them anything else or it would negate the settlement. We have contacted the reporting agencies with our documentation to have it removed but have not gotten the determination back yet. Quite frankly, we do not want to give them one more cent since we satisfied our obligation as was negotiated.
Lenders may take the settlement if the documents were new.
Since they're old the lender is going to wonder why it wasn't removed.
I guess I need to know what the definition of "new" is. The settlement offer letter is from October 2006 and check copies are from November 2006 through April 2007. Would these be new enough? I didn't realize it was still on his report until I pulled both our credit reports 2 months ago. (We have not been contacted from anyone regarding this debt since we paid off the settlement amount and foolishly thought it was resolved) We filed the dispute on it with the credit reporting agencies just last month and just last week received a letter from all 3 saying that it is being investigated.
Conventional loans are going to require that all collections be paid...period. So on anything showing on your credit report you will need documentation that they were taken care of.
FHA might be a better option for you though as FHA does not care about medical collections and does allow for lower credit scores (which you may have due to these items) like conventional loans do.
On the repo as long as you have documentation of the settlement agreement and copies of cancelled checks corresponding to the settlement agreement, you are fine.
I would suggest considering negotiating settlements on the two credit cards using some of your savings (again keep all documentation so you can show they are taken care of) and then going FHA with a 3% down payment.
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We spoke with an attorney and was advised not to pay them anything else or it would negate the settlement. We have contacted the reporting agencies with our documentation to have it removed but have not gotten the determination back yet. Quite frankly, we do not want to give them one more cent since we satisfied our obligation as was negotiated.
