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I've been reading posts and still would like to get some things cleared up...
-If you have a collection that is over $1000, you have to pay it off or be in a payment plan for 6 months in order to be approved for FHA no matter how old it is?
-Or if you have a lot of reserves and a 640 mid credit score, it does not need to be paid?
-Or does it just depend on the lender?
What is correct? If it just depends on the lender-where can I find me a lender that I can work with?!
FHA says that of you have combined collectionsof over $2000 (non medical)
that 5% of the amount must be used in your DTI but it does not say you have to pay them off
Collections at the banks discretion and they all have their own policies
The stronger your loan file the better your chances
what brian said.....
and
ask friends/family/coworkers for a referral to a lender they used and were happy with.
or, ask a realtor.
@anca21bi wrote:I've been reading posts and still would like to get some things cleared up...
-If you have a collection that is over $1000, you have to pay it off or be in a payment plan for 6 months in order to be approved for FHA no matter how old it is?
-Or if you have a lot of reserves and a 640 mid credit score, it does not need to be paid?
-Or does it just depend on the lender?
What is correct? If it just depends on the lender-where can I find me a lender that I can work with?!
tell us a little about your situation - what are your concerns with regards to your scenario
This is my situation, I had a financial counselor for down payment assistance tell me I SHOULD pay off the high collections but not something I must do to get approved. She told me it would just look better, overall,I would just like to get approved in the next 3 months for a FHA loan. Does it look feasible? What should I do?
anca21bi, it's possible you could get approved, however the debt ratio is a bit on the high side for a $225k sales price which would be about your max (looks much better for a $200k sales price)... particularly with the $145k in student loan payments looming in the future. The negative items on credit after the BK would be a bit concerning for underwriting as well, you may need to have clean credit for 24 months due to that (when there is a series of derog items after a BK, usually underwriting will apply the BK waiting period to the most recent derog item).
The Back to Work program just allows someone to qualify before the 2-year waiting period after a Ch 7 BK discharge (or 3 year waiting period after a foreclosure or short sale). If you explain the reason for the negative items after the BK & can back it up with documentation (i.e. the tax returns for those years showing your income was low) then that would help your situation out. It doesn't make the underwriter completly dismiss the negative items after the BK but it'll soften the impact they'll have on the underwriting decision.