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Advice on home loans if you have a collections in your past

Submitted by on Thu, 10/22/2009 - 10:47
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Me and my wife just resently fount out that were going to have a child and were wanting to buy a house. were renting right now and were wanting to buy a home by the time the baby is born. My wife also needs a new vehicle . but im worried because I have had 2 collections on my credit. well i think they were all on my credit. one for a cell phone and the other for direct tv. Im afraid that these are gonna keep me from getting a home loan . I dont know any thing about this stuff could you plese give me some advice.


Quote:

My wife also needs a new vehicle . but im worried because I have had 2 collections on my credit. well i think they were all on my credit. one for a cell phone and the other for direct tv. Im afraid that these are gonna keep me from getting a home loan .


Hello and Welcome :D

I just recently purchased a new home last week. I will share a little advice with you on what you should expect.

If you have current "unpaid" collection accounts on your credit reports then you will need to settle them before you go to the loan underwriting dept. You must first get pre-approved and depending on the balances on the collections it may affect your debt ratio slightly or not even at all. For a smoother transction throughout the entire loan process I would definately settle the collections ASAP and get proof for the future mortgage lender company.

As for your wife needing a new car, you may want to be careful with this when considering purchasing a home in the near future. Being that it will be a new credit line opened up on your credit reports with no rated payment history. The mortgage lender may view this as favorable/unfavorable, I am not for sure. However it will increase your debt ratio for sure. So you may want to hold off on the car untill you are absolutely sure what you want to do first. ::KEY POINT:: You want your credit reports and finances in the best shape possible before applying for a home loan ;)

Best of luck with the house and keep us posted. Congrats on the baby!!


Submitted by Cool_Abyss on Fri, 10/23/2009 - 06:34

Cool_Abyss

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How old is the collection account? FHA looks at the last two years if you are looking to get an FHA loan. Before you pay anything, talk with the lender as you do not want to re-age anything. As Cool said you want your credit and finances in the best shape as possible when applying for a home loan but be careful you do not wake up an account they are not concerned about.


Submitted by kfstaff24 on Fri, 10/23/2009 - 06:47

kfstaff24

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Absolutely, please read FHA standards listed below ;)

[quote]
FHA Loan Qualifying Summary
...............................................................................
FHA loans are the easiest type of real estate mortgage loan to qualify for. The FHA guidelines for loan qualification are the most flexible of all mortgage loans that require less than 5% down payment.



Following is the basic FHA loan qualification guidelines.


  • Two Years of steady employment, preferably with same employer.


  • Last two years Income should be the same or increasing.


  • Credit report should typically have less than two thirty day lates in last two years with a minimum credit score of 620 or higher or in some cases no credit score at all.


  • Bankruptcy's must be at least two years old, with perfect credit since discharge.


  • Foreclosure's must be at least three years old, with perfect credit since.


  • Your new mortgage payment should be approximately 30% of your gross (before taxes) income.
Supported link: http://www.fha-home-loans.com/loan_qualifying_fha_loans.htm
[/quote]


Submitted by Cool_Abyss on Fri, 10/23/2009 - 07:08

Cool_Abyss

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