Can I ever qualify with unpaid charge-offs? HELP

[Anonymous]

I'll make this concise - I had 11 private student loans charge-off in December 2009 as a result of unemployment and I simply could not make the payments. The balances of the loans range from $1,500 to $30,000 - needless to say, some of them I can PIF soon, but the others will take years to PIF. Over the past 4-5 months, I've made payments each month with each of the loans (payment plan with OC).

I would like to buy a house next year.

As a result of the charge offs, my credit score is currently in the 500s. However, I was lucky to start a great job in February and I think in about 12 months with paying off credit card debt, etc I will be able to get my scores to 620. With a middle score of 620, but with probably 8 charged off loans that have balances (that receive payments every month) will anyone approve me for a mortgage?? I spoke with one lender that said he could never approve me with charge-offs not PIF, but my household income is nearly $150K now so it seems inconceivable that due to a bunch of student loan charge-offs, I literally can't buy a home for the next 10 years!!

[Anonymous]

Unfortunately. time, not money is your friend in this situation, and  your past payment record does have a bearing on the ability of others to trust you to pay them in the future. With something so recent and so many of them, even if your credit score jumped up to 700, it will be hard for any mortgagor to trust that if you lost your job in the future you won't stop paying your mortgage as well. The older these debts get (say 3-4 years) the less of a problem they will be. Just rent a place for now, continue paying  off the loans, and save as much money as you can for a larger than normal down payment for a house. Since you are making 150k that shouldn't be too hard to do.  If you want to take the route of less integrity, you could continue to ignore the loans, and save all your money and pay cash for a house in a couple of years, so your credit scrore won't matter until it comes time to turn on your utilities which will probably result in larger deposits due to having bad credit, but that won't be a problem for you since you'll have the money. 

Good Luck to you!!

[Anonymous]

So is your answer "no"? Do you truly believe that I won't be able to qualify for a mortgage with the charge-offs on my account?

I find it truly frustrating that people can have thier home forclosed, completely walking away from the debt and yet, they can buy another home as soon as 3 years later. However, I only had student loans charge off, which I've continued to pay on monthly and I'll have to wait longer than those people that faced foreclosure.

[DallasLoanGuy]

look into 'rehabilitating' your student loans.

they 'used to' have a program where you make payments on tim for X months and they would remove ALL derogatory info

they called it 'rehabilitation' so you might search for that.

[Anonymous]

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@Anonymous wrote:

So is your answer "no"? Do you truly believe that I won't be able to qualify for a mortgage with the charge-offs on my account?

I find it truly frustrating that people can have thier home forclosed, completely walking away from the debt and yet, they can buy another home as soon as 3 years later. However, I only had student loans charge off, which I've continued to pay on monthly and I'll have to wait longer than those people that faced foreclosure.

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My answer is the same as it is for those folks out of Bankruptcy, not NO but WAIT. As your unpaid debts becomes older (usually 3-4 years) and you re-establish a good payment history  over that time which overshadows the older bad debt , then you can move ahead with your plans to buy a home.  No one is going to give you a mortgage with fresh charge offs on your credit even if they are all PAID IN FULL by the end of the year, unless they totally disappear from your credit report as you pay them off.  The number of charge-offs is also a GIANT RED FLAG. If it were only one, you might have an easier time, but 11 at the same time is a temporary nail in the coffin.  Also, by saving your money, you'll be in a better position to continue to pay your bills if you ever become unemployed again, which will go a long way to convince a lender that this time you can handle the rainy days of life.

Student Loan payments are usually put in the same category as Tax Liens, meaning they can't be discharged through bankruptcy but can be collected through garnishhment of your wages. The only saving grace for you is that yours are Private Loans and not through UNCLE SAM.

Trust me, I've been where you are about 25 years ago but only 2 charge-offs and I'm glad I was made to wait, instead of being given what I want when I wanted it, because no matter how I tried to fool myself I still wasn't ready!!!

[Anonymous]

You need to set up a fully contracted paymetn arrangement with the loan companies.  This is what the rehab stuff is about.  Once youhave that in writing, and have made 12 monthly payments with receipts, you should be OK.  You will need to be on time or early for every payment, and the recent payments will not count unless they are an offical payment arrangement you can document.

[Anonymous]

And to your point about the loans and getting a loan.  Yes, there is a big difference in having a BK or foreclosure and going into defualty on a student loan.  But, you went into default with 11 accounts.  That is a huge issue and no loan officer will be able to get you a loan until those loans have been removed from the gov'ts defualt list.  Period.  It is the same as having a tax issue or something.  The Gov't will not OK the loan if you are in defualt on an obligation to them and sice with your scores, your only option is a gov't backed loan, that is what youhave to deal with.  So, get the loans rehab'd and give your score some time to come up.  Beware that 620 is already getting pushed to 640-660 by alot of lenders, so it is by no means a magic number.

[jdxprs1]

if you can file bankruptcy on student loans, that might be the way to go. you can rebuild and by a house in 2 years or less that way. plus you should be able to put up a great down payment.

[Anonymous]

you can not file BK on student loans (I believe), and a BK judge is not going to allow it with the current income as they should be able to meet the payments.

[Anonymous]

Thanks for everyone's replies.

Just an FYI, these loans are PRIVATE loans and not connected at all with Direct Loans or the US Dept of Education; therefore, the IS NO REHAB program for them. I have spoken with Key Bank (OC) at great length about this and they have made it painfully clear that there is no rehab program. The best option is to enter into repayment agreements on the loans (which I have done) and pay them on time, which I have also done.

Another FYI, these loans were rolled into only 2 seperate accounts for repayment so while it appears that I had 11 charge-offs and technically I did, I really only fell behind on 2 payments because they were all lumped together for repayment purposes. Also, these loans charged-off within just 2 years of graduation. I was unemployed (or under-employed) imediately following graduation so it wasn't like this was a "rainy day" or bad spot in life, I never even had the chance to start! I utilized all of my deferments and then did my best to keep up, but couldn't. Let's be honest, no 24 year old has an emergency savings fund to address law school loan payment when they're immediately unemployed after being a full-time student since they were 18.