A 620 FICO mid-score was not enough to qualify for a FHA loan....at least not for me.

[Anonymous]

Although FHA does not require it, it is becoming more and more common for lenders to do so.   That is esepcially true for that amount of money.  It is not about the money itself as at this point there is liitle chance that is going to come back to haunt you.  it is about character.  If you walked away from 65K in debt before, you might do it again.  It is that simple.  If you have an extremely strong file they may let it slide, but like everything, they weight the good and the bad to make decisions.  Having 65K in debt that you have walked on if you are in healthy finacial position makes it seem irresponsible.  Buying a house when you have 65K in debt if you are not in a strong financial position makes you seem like a poor decision maker.  So whatever the situation, it is a pretty ugly mark to expect an underwriter to just gloss over. 

In the end, yes it is unrealistic for you to expect to be able to buy a house while you are walking on that much debt from someone.  Ask yourself this, would you loan money to someone who was willing to walk on that much debt.  That does not mean it is impossible for you to get a loan though. 

[Anonymous]

---

@Anonymous wrote:

Although FHA does not require it, it is becoming more and more common for lenders to do so.   That is esepcially true for that amount of money.  It is not about the money itself as at this point there is liitle chance that is going to come back to haunt you.  it is about character.  If you walked away from 65K in debt before, you might do it again.  It is that simple.  If you have an extremely strong file they may let it slide, but like everything, they weight the good and the bad to make decisions.  Having 65K in debt that you have walked on if you are in healthy finacial position makes it seem irresponsible.  Buying a house when you have 65K in debt if you are not in a strong financial position makes you seem like a poor decision maker.  So whatever the situation, it is a pretty ugly mark to expect an underwriter to just gloss over. 

In the end, yes it is unrealistic for you to expect to be able to buy a house while you are walking on that much debt from someone.  Ask yourself this, would you loan money to someone who was willing to walk on that much debt.  That does not mean it is impossible for you to get a loan though. 

---

You make a valid point mickie08, although your reply seems like you have some personal issues with my situation. I'm not sure why?

However, am I any more of a risk than a person who claimed bankruptcy? Or a person who currently has only a 620 FICO score, high DTI, high utilization percentages and can barely scrape together any funds for a downpayment? I see stories of people with these statistics getting loans here everyday on the forum.

I'm certainly not condoning my past behavior but I would just hope that a lender would be able to see past it.

I guess I'll know soon enough.

[nathan]

Why don't you just wait for some of those baddies to fall off. You could still buy a house around Nov and get the tax dough. 65k in debt at this time will scare the hell out of any ur.

[Anonymous]

I have no personal issues at all..  I am sorry if I came out sounding that way.  But someone who has at least went through the process of BK and then developed credit after that at least legally took reponsibilty for the debt and did what they had to do to move forward.  So, no, I would not consider you any better of a credit risk than a BK or foreclosure that was the same age as the old debt.  If anything, the accounts still being unaddressed in any way shows a unwillingness to deal with it either through BK (and suffering the consequences of a BK) or by paying them off.  Again, this is not a personal thing, just logic applied to a situation.  If the credit history after all the debt is spotless and you have nice reserves and a decent size down payment, it is quite possible that this will fly through with little or no problem.  Then once they drop off your report you will be in great shape.   But, I was just making the point that in this credit/mortgage market, you can hardly blame a bank for being leary with 65k in outstanding debt that has not been paid in 6.5 years.  It is not an FHA issue though, but a lender one.   Too many lenders have gotten burnt on bad loans and now are looking at files alot differently than they did awhile ago.

[Anonymous]

---

@Anonymous wrote:
I have no personal issues at all..  I am sorry if I came out sounding that way.  But someone who has at least went through the process of BK and then developed credit after that at least legally took reponsibilty for the debt and did what they had to do to move forward.  So, no, I would not consider you any better of a credit risk than a BK or foreclosure that was the same age as the old debt.  If anything, the accounts still being unaddressed in any way shows a unwillingness to deal with it either through BK (and suffering the consequences of a BK) or by paying them off.  Again, this is not a personal thing, just logic applied to a situation.  If the credit history after all the debt is spotless and you have nice reserves and a decent size down payment, it is quite possible that this will fly through with little or no problem.  Then once they drop off your report you will be in great shape.   But, I was just making the point that in this credit/mortgage market, you can hardly blame a bank for being leary with 65k in outstanding debt that has not been paid in 6.5 years.  It is not an FHA issue though, but a lender one.   Too many lenders have gotten burnt on bad loans and now are looking at files alot differently than they did awhile ago.

---

Thanks for clarifying. 

[Anonymous]

---

@nathan wrote:
Why don't you just wait for some of those baddies to fall off. You could still buy a house around Nov and get the tax dough. 65k in debt at this time will scare the hell out of any ur.

---

I actually was looking to wait until the end of the year but the LO on my original deal told me that I wouldn't have any issues getting approved today. Obviously, they were seriously mistaken or incredibly incompetent. Plus,several people in this forum said to try another LO so that's what I'm doing.

I put in a contract for a custom home that will be built and finished by late September. Hopefully, they'll look past my baddies and focus on what I've accomplished in the last several years. If not, then I'll just stop the process and just wait until next February when the MyFICO simulator says that my scores will be between 840 - 850.

Shouldn't have a problem then! 

Message Edited by schlebrock on 04-19-2009 03:20 PM

[medicgrrl]

I was an underwriter, both FHA, VA and conventional.  I have been out of the business for the last 5 years but my previous experience was that most "A" lenders will not close a loan with more than $5000 in outstanding collections.  I also have some very old collections on my report and from what I am being told locally it sounds like that $5000 is still the rule of thumb.  FHA only insures the mortgages so the lenders are allowed to make additional requirements to satisfy their own internal policies and guidelines.

[Anonymous]

---

@medicgrrl wrote:
I was an underwriter, both FHA, VA and conventional.  I have been out of the business for the last 5 years but my previous experience was that most "A" lenders will not close a loan with more than $5000 in outstanding collections.  I also have some very old collections on my report and from what I am being told locally it sounds like that $5000 is still the rule of thumb.  FHA only insures the mortgages so the lenders are allowed to make additional requirements to satisfy their own internal policies and guidelines.

---

Good information to know, thanks medicgrrl.

[Anonymous]

To add on to Mickie's post, people who file BK have not only taken the legal steps to deal with their debts, but also, in most cases, paid the debts.

BK is not a magical solution that erases debts -- not only does it come at tremendous personal sacrifice, it also entails having a payment plan established by a court appointed officer. So even with BK, the debts do get paid.

Just clarifying. The OP made it sound as though (unintentionally, I honestly believe) that BKers don't pay the debts included in BK.

[Anonymous]

---

@Anonymous wrote:
To add on to Mickie's post, people who file BK have not only taken the legal steps to deal with their debts, but also, in most cases, paid the debts.

BK is not a magical solution that erases debts -- not only does it come at tremendous personal sacrifice, it also entails having a payment plan established by a court appointed officer. So even with BK, the debts do get paid.

Just clarifying. The OP made it sound as though (unintentionally, I honestly believe) that BKers don't pay the debts included in BK.

---

My reason for creating this thread was to let posters on this forum know that a FICO score of 620 isn't the magic ticket to mortgage approval. However, it seems like we're getting into a morality debate with these last few posts and that isn't my intention.

Obviously, there are several types of bankruptcy. Some that erase all of your debt and some that don't. I'm fully  aware of the differences. So, if Underwriters (and some posters here) believe that filing for bankruptcy or having poor credit scores with high utilization and bad DTI are less riskier candidates for a mortgage than myself, then I guess I'm out of luck.

Thanks for the replies.