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Through about two years ago we ran up some nasty credit card debt.

We stopped making payments on three cards, walking away from balances of roughly $50k, $40k, and $10k.

Two years ago we settled the biggest debt for about $21k.

We have an offer now to settle the next debt for $20k.

The third card has not been pestering us.

In that time (and before it), we stayed 100% current on our mortgage, paid off a car loan, and kept 100% current on an auto lease and other credit card debt (always paying in full).

Our joint income is again in good shape (almost twice what it was in 2009, our worst year), and we're looking to refinance our mortgage (6.75% for 20 years, $114k owed on $180k house), taking $20k out to settle the cc debt mentioned above.

However, not surprisingly, a 589 credit score is interfering with us getting a typical mortgage. Even an FHA loan, black and white, won't lend to 620 or lower.

I presume there are brokers and lenders out there who would give us the mortgage we're looking for - 15-20 year term, rate lower than current 6.75%, $20k cash out. But I also presume many are sharks and opportunists.

So I'm wondering which such brokers or lenders are out there, that people in our situation have had positive experiences with.

Thanks.




Even with a 620, I dont think FHA would touch you with that 3rd card still outstanding.....that is a lawsuit waiting to happen. Get that card resolved before thinking about a mortgage refi.

Sub: #1 posted on Sat, 09/10/2011 - 07:56

SOAPLADY SOAPLADY
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(Posts: 17272 | Credits: )

When you say "lawsuit waiting to happen" what specifically do you mean? And I apologize for my ignorance on this.

Would a solution be to get more cash out and use that to settle the third card?

My regular monthly cash flow could afford the mortgage, even without the lower rate I'd expect refinancing.

Sub: #2 posted on Sat, 09/10/2011 - 08:15

qwert450 qwert450

(Posts: 5 | Credits: )

I think what soap meant is that an unresolved debt on your report could turn into a lawsuit at anytime. Especially one of that size. Collection agencies love seeing mortgage inquires on credit reports. It basically tells a collector there is money. When I see them on a report, my settlement offers lessen and my timeline tightens up. I know the debtor wants something. So if you haven't applied for a mortgage before settling that third card, keep it that way.

Sub: #3 posted on Sat, 09/10/2011 - 08:24

lizabethwolin lizabethwolin

(Posts: 12 | Credits: )

For these purposes, what is a mortgage inquiry?

Two prospective lenders that I've approached have pulled my credit report (that's how I know the score), but I have not formally applied for a mortgage.

Sub: #4 posted on Sat, 09/10/2011 - 08:34

qwert450 qwert450

(Posts: 5 | Credits: )

Damage may already be done. When a credit report is pulled, it leaves an inquiry. The reports I pull code each type of inquiry, for example, mortgage, bank, collection. I collect student loans and if I pulled your credit report and saw a current mortgage inquiry, my eyes would light up. It means, at least to me, that I now have a big bargaining chip.

Sub: #5 posted on Sat, 09/10/2011 - 08:49

lizabethwolin lizabethwolin

(Posts: 12 | Credits: )

Thanks. You've been helpful here.

Another question: When you say "there is money" (hinted at by the mortgage inquiries) what do you mean?

I mean obviously if someone had unsecured debt like cc or student loan, and applied for a mortgage to buy a boat or a vacation, then yes, that's a red flag.

But if someone applied for a mortgage to get cash out of the house to settle the debt, wouldn't that be what a lender would want to see? No lawsuit, money received faster, all good.

Obviously "borrower intent" doesn't appear on a credit report, but what catches your eye? The idea that a borrower thinking they qualify for new or revised credit means they have more money so as to qualify?

Sub: #6 posted on Sat, 09/10/2011 - 09:14

qwert450 qwert450

(Posts: 5 | Credits: )

What she is trying to say is that your accessible for the entire balance. Why do you feel that you should receive a discount of tens of thousands of dollars of credit card debt that you walked away from when you have the assets to pay the balance. After seeing a mortgage inquiry and once I saw the value and mortgage on the house currently I would not settle for less than 80% because the alternate is your sued and a judgement is placed for the balance and leins are placed and bank accounts are attached.

Sub: #7 posted on Sat, 09/10/2011 - 17:55

fhazlett fhazlett

(Posts: 1 | Credits: )

Exactly. They can see an existing mortgage so they know you are either refi'ing or buying a new house. Either way, they are not going to give as low a settlement if one at all...a collector can see the mortgage and can easily search what your home is worth to see what the equity is. Heck I used to do that 10 years ago execept I had to call the city appraisers to find out values. I had people who wanted to refi but knowing there was $20k equity to cash out on, why would I cut MY commission by settling for less than the full balance.

Sub: #8 posted on Sat, 09/10/2011 - 19:30

SOAPLADY SOAPLADY
Moderators Cum Industry Expert
(Posts: 17272 | Credits: )

As a 10 year mortage professional, may best advice to you is to seek a refinance from your local Credit union or Bank. Stay away from the internet. you will be reffered to mortgage brokers who will charge you excessive fees. Who do have for your mortgage lender now? See if they can refinance your loan at a discounted origination fee. Any up front fees - these are for the credit report and appraisal and not a good faith fee to lock in your rate. You still have to qualify for a loan based on credit , cash reserves, debt to income ratio and the value of the home. If the value comes in lower than expected and you do not have the equity to cash out the Lender should be honest and tell you that all they might be able to do is a Rate and Term loan, and you wont be able to cash out. With that being said however , if you have a lot of debt and your DEBT TO INCOME RATIO is too high, then in order to get the Loan to value you want, you would be required to pay off some or all of the debt to get the loan. So you have to ask your self , If I pay off the credit card probably to lower your debt to income ratio so you qualify Is the refiance including all closing cost going to drop my rate 2 and will I recapture the expenses with in 2 years? If the anser is no then stay where you are. There are certain guidelines all lenders are required to follow. Right now any cash out transaction where I am is limited to 75 loan to value and a 720 credit score. Rate and term can go up to 95 LTV with a credit score of 720 . BK must be older than 3 years with no current delinquencies. Quicken loans is pressuring you, not explaining what is going on and My best advice is to seek the advice of a local professional Loan officer who can sit down with you face to face and explain everything to you. If you are not getting a good feeling from him/her then Shop around. Your credit score will not adversly be affected if you are Shopping with in 30 days of the pulls. Its ok to shop. As far as the gift lenders have to source and season funds in other words if a Major bill JUST GOT PAID OFF Or is getting Paid off they want to Know WHERE you got that money.. That is why they ask for 2 months bank statements. If you didnt have that money in the bank then how did you pay that off? Same if you were needing a down payment for a loan. So yes if you get the money to pay off anything from a family member they will be required to offer it as a gift in the form of a gift letter.I dont think Quicken Loans is scamming you they are just not EXPLAINING it to you correctly. No ones house is worth anything anymore and no one has the equity to cash out hardly. if your current interest rate is 6 or less and you do not plan on staying in this house longer that a few more years, stay where you are. If your credit is back up and on track after the BK and your Debt load is not high, shop around and dont let anyone pressure you into something you do not understand. Ask a ton of questions and dont blame the lender because you signed something you didnt understand . Ask and make sure you know what you are signing before you do it. Lenders are required to DISCLOSE everything its the LAW. it will be in writing on all of your documents. If you dont understand- ASK for an explaination. Credit restrictions and lending is tight right now so be patient. But shop locally or go back to your current lender since they have your loan.

Sub: #9 posted on Mon, 06/04/2012 - 09:57

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