Are we ready to buy a home?

[nate79416]

I started working on my credt so that I can buy my family a home, I have had several baddies removed. Below is what I have left

Cap one(PFR) 672 they will settle for $420 should I pay now or wait to see what the UW says

Medicals bills in collections

$120

$140

$160

$38(yea 38 bucks)

$335

I am waiting on the bills for 2 of these to see where they came from. 

Should I pay everything above? I heard paying items off can actually hurt my credit score.  One of the baddies that I paid dropped my score by 15pts

I have not bought any new reports since I have had the baddies removed, so I dont know what my CURRENT mortgage scores are but in March they were very bad

609, 579 and 554

Mycurrent fico 8 is

EQ 628 TU 647 EX 615

Annual salary 65k

Monthly car $291

Credit card(only one) $50 a month

everything else is utilities food cable

My UTI on my credit card is high, my limit WAS 2250 and my balance is 1679 but I requested a increase(last week) and now it is 3500, I plan to have 1000 of that paid off by end of July or sooner, I do beleive that is killing my scores, because they didn't go up much even with baddies removed. I plan to go through my credit union for a home loan. I am married but my wifes credit is very bad right now, (and will take longer to improve)so I will be the only one on the loan and we are both okay with that. How much home would I qualify for with my 65k a year salary, Will I be ready maybe by October? I can have all the medical collections paid and the charge off paid, if needed

ANY help will be appreicated THANKS

[Anonymous]

 the more baddies removed the better!  good luck!

[nate79416]

I am going to just pay everything off and go from there

Thanks

[pt2005]

You can do it!

I'm closing today after a long battle of credit issues. I was in the same or worse condition. They key here is you have to believe in yourself.

When my files went to Underwriting it showed 3 PAID/Settled chargeoffs. If you have Chargoffs you need to have them paid or settled. Make sure they are paid or partially paid and REPORT $0 balance. DO NOT dispute anything if you plan to apply for mortgage. The lender can work out the Chargoffs if they are not recent but they cannot deal with outstanding Customer Disputes.

If you want less headache, plan to clean everything up and give it 2 MONTHS for your bank statements to look clean. Lender will only ask for 2 months of bank statements. 

[nate79416]

Capitol One is reporting a charge off  with a 0 balance, but I need to pay the collection agency off, they will update as paid, aswell as the medical bills. I am taking 5k from my 401 to pay these off and use the money left for down payment, closing cost etc, I have money saved but wanted to have enough for down payment, closing etc

[Anonymous]

Try to negotiate PFD on those derogs.

[nate79416]

Everything that I have left will not PFD, they will only update as paid, so my scores will take a hit, I am going to pay down my credit card to about 10% maybe that will help me recover, do I need to wait until the first of the year to apply for a home, so that my scores can recover?

[frugalQ]

paying off the collections will not increase your scores, so i suggest you don't pay them until the lender/UW tells you to do so at closing.

bringing down your credit card utilization will probably net you a few points also.

you should not give up your desire to start the process in October.  That's a few months away, and you may be pleasantly surprised where your scores are at that time.

you should purchase your updated mortgage scores once the credit card updates...even if it's just the bureau that has the old 579 score (your mid score report).  at least you can get a feel for where you are.

good luck!

[Anonymous]

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@nate79416 wrote:

Everything that I have left will not PFD, they will only update as paid, so my scores will take a hit, I am going to pay down my credit card to about 10% maybe that will help me recover, do I need to wait until the first of the year to apply for a home, so that my scores can recover?

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Lowering your utilziation % will undoubtedly help boost your scores. I'd pay them down as much as possible, and then purchase your mortgage scores on here.

I'd also look into local lenders to see what overlays they have for FHA regarding minimum scores.

[Anonymous]

The wife and I just moved into our new home. When it was time to pull credit, I was nervous what was to come and if we were pre-qualified.  We had zero credit card balances. I had paid collections that were years old.  I hadn't missed a payment in over 2 years and they use the middle number of your 3 credit scores.  I believe Sallie Mae and Freddie Mac still require that loans are underwritten with FICO scoring model 4.

During the process, our mortgage originator stated that you cannot have a missed payment in the last 12 months.  If it is in collections, there is no point to paying them off, it will NOT increase your credit score paying them off.  

My advice from just going through this.  Get your credit cards paid off and keep it that way months before they pull credit.  Make sure that you have enough cash to bring to closing.  You will need to pay buyer paid closing costs and the down payment on your house.  Typical closing costs run about 4-6K.  Whatever lender you use will tell you that they will "pay:" for closing costs, but all they do is credit you on closing day then raise your interest rate to recover that credit.

We talked about buying another house for years.  We wanted to buy something fast, but we chose to pay down debt and save money before we bought a new house and I am glad we did.  Mortgage rates are at historic lows and it would be great to buy one now.  But I would advise that you make sure you are in a great spot to do so because it is a 30 year commitment. Keep an eye on inflation as well.  HIstorically that is the key indicator when interest rates will start to rise.  They combat high inflation by raising interest rates to lower circulating money by making it more expensive to borrow money.  

You will also probably want to go conventional and no that does NOT require 20 percent to put down.  The reason being is when you do pay off the loan enough to where you are at 80/20, you can restructure your loan to remove the PMI instead of refinancing, which requires another hard triple pull and having to pay closing costs again. 

Good luck and if you have any questions please let me know!