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New Member
Posts: 7
Registered: ‎03-17-2017
0

First-Time Homebuyer looking for advice

Hello all! This is my very first post!!! But I have been reading the forums for about a year now learning as much possible to help boost our scores! We started in the mid-400s and we have made a big improvement since then. So, this forum has been a huge help! Thank you to everyone!

 

Currently, my middle Mortgage score is 621.

My husbands middle Mortgage is 570. *

*I know we need to push his up 10 points for an FHA approval.  I added him to one of my credit cards this week in hopes that does the job. (He does not have much credit at all so this has been challenging.)

 

We are looking to buy our first home and have heard some conflicting advice that I was hoping someone could help clear up so we know which direction to go in!

 

Here is our current  situation:

 

OPEN CREDIT: *

Retail- $233 bal .......$480 limit

Retail- $728 bal .......$800 limit

Retail- $288 bal .......$400 limit

Bank Card- $250 bal .....$300 limit

Bank Card- $420 bal .....$500 limit

Bank Card- $288 bal.... $350 limit

**We were advised by a lender to pay all of these off which we will have done in the near future.

 

I also have a student loan of $13k at $99 mo.

 

We have 3 cars: 

$9,000 bal at $300 mo

$8,000 bal at $350 mo

$23,000 bal at $556 mo

 

 

 

We also have COLLECTIONS from 2014 or later totalling about $15,000.(The biggest collection is a $9,000 vehicle that we gave back in 2012. So the other collection accounts are pretty manageable amounts)

 

My question is how likely is it that we will have to pay off the collections before we can close on a home?

We cant go any further with the lender we spoke to until we've paid off the open credit and both have appropriate scores. Therefore, I was hoping to get some advice instead of waiting til then to find out.

(When I spoke to a lender a few years ago she stated not to worry about anything older than 2 years.)

 

My other question is if we have to pay collections, which route do we need to go to ensure we do this correctly?

Can we pay a settlement amount on the debt?

Do we need to make sure its a PFD?

What if they wont agree to a PFD?

 

I appreciate any advice we can get! 

Established Member
Posts: 60
Registered: ‎03-13-2017
0

Re: First-Time Homebuyer looking for advice

Welcome! My husband and I are going through the same right now. We actually have a signed contract for new construction with closing scheduled for August as of now.

Husband's credit is good, but I have collections on mine AND I'm also trying to get to 580 with my score.

Here are my collections:
FCO - $1,668; settled for $166.80
Comenity- $751; settled for $469
National Credit Systems $4,181; will do early exclusion with Experian- only reporting there
DeVry - $1,300; did consolidation so debt will be absorbed in that
Berks Credit Collections $545/$683/$724; will do early exclusion on Experian- only reporting there
BB&T - $1,411 charge off; will settle for $700

My mortgage scores on MyFICO are 541/555/609.

Our lender said I should focus on FCO, and National Credit as those are apartment collections. They're from 2011, but the fact that's it's still on my report I have to do something with it. Also had to handle DeVry as that is a defaulted student loan.

With FCO, I called them and asked how can we handle the account. Didn't acknowledge the debt, and did not mention I was buying a home. The account is scheduled to fall off in June 2018.

Comenity is a charge off from Feb 2017, of course since it's recent I had to handle it. Again, called to see how I could handle acct, and asked if I settle could have it report as "paid in full". I was told if I gave $469 right then I could, so I did. Reported to TU and EQ within a week and had score jump of 24 & 26 points.

Ask the lender what's okay. Different lenders have different requirements. Ours said it's okay to settle or even have the collections with a payment plan established. I just need to get to the 580. I was also told I don't have to worry about the medical collections(Berks).

FICO8 Scores - Mar 2017 562TU / 572 EQ / 576 EX
On Mortgage Journey
Starting Mortgage Scores (Feb 27) 523EQ / 547TU / 564EX
Mortgage Scores (Mar 13) 574EQ / 602TU / 571EX
Contributor
Posts: 174
Registered: ‎04-17-2014
0

Re: First-Time Homebuyer looking for advice

What is your household income?

How much do you have saved?


12/23/14: 536 | 11/8/16 680
MAJORS: $4.5K Gap Visa, $4K Cap1 QS, $3K Southwest, $2.5K BOA, $2.5K Discover, $1K Chase Freedom, $750 Citi Best Buy, $500 Cap1 Platinum, $500 BuyPower GM, $300 US Bank H-D STORE $1K Macy's, $2K VS, $600 Home Depot, $300 Old Navy, $250 Kohl's, J Crew, Venus $1,800 Care Credit LOANS $10K Ally Auto
New Member
Posts: 7
Registered: ‎03-17-2017
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Re: First-Time Homebuyer looking for advice


mamatried wrote:

What is your household income?

How much do you have saved?


Our income is $92,600

We have saved $15,000

Valued Contributor
Posts: 1,166
Registered: ‎04-08-2015
0

Re: First-Time Homebuyer looking for advice

AU accounts can cause trouble when looking for a mortgage and will most likely be requires to be removed , a better option is to get your hubby a secured card through cap one or even open sky. Search for AU and FHA for more information
Contributor
Posts: 174
Registered: ‎04-17-2014
0

Re: First-Time Homebuyer looking for advice

That's a great income so that should help you progress faster than some others in similar situations. That also makes your DTI less scary since you do have a LOT of out-go every month.

 

580 for the hubby is a good mini goal, but view it more as a stepping stone. Although FHA's guidelines go down to 580, you're really going to need mid-scores of 640+ to get an FHA mortgage. USDA Rural Development has a great program if you're in a rural qualified area, but depending on your county, your income may be too high. As you probably already know, you're going to need 680+ and 5% down to go conventional.

 

I take it you're working off of Free Credit Report Pulls or Credit Karma in order to have those ballpark scores? Does your hubby have collections or late pays? No credit would be a zero credit score with a lender with manual underwriting can work with; but he's got some sort of baddies holding him down if he's 500's. If you haven't pulled detailed reports on BOTH of you, I would do that to make sure there aren't any skeletons hiding.

 

How soon are you hoping to buy? I would say it's feasible to get your scores over 640 in 4-6 months of HARD GRINDING, but the FICO is a little diff than Credit Karma, so I would guess you're on a longer path.. 

 

 

Your Questions

My question is how likely is it that we will have to pay off the collections before we can close on a home?

You will have to pay them. After 2 years, they'll still show on your credit report (up to 7 years collections, 10 years for judgements) 

 

My other question is if we have to pay collections, which route do we need to go to ensure we do this correctly?

PFD is best! Try very very very hard to get PFDs for any open or old collections. The first time you see a PFD drop off your report, within 4-6 weeks, if not immediately, you'll see big score boosts. You can try to settle / PFD, but I found best success with PFD when I agree to pay the FULL amount. Every collector is different.

 

Can we pay a settlement amount on the debt?

Yes, you CAN settle, but it will show on your report as SETTLED for less than original debt which is less desireable. This is one notch up from deadbeat collections item on a credit report. I do not recommend it for your situation. I would only recommend it for someone who say owed $25K to Amex, but had a $30K income.. if they had an offer to settle for pennies on the dollar, it would make more sense for them to settle and move on. You make enough and your debts (although big), are debts you can pay. 


Do we need to make sure its a PFD?

YES! If you do not make it crystal clear that the expectation is PFD (but don't use PFD or Pay for Delete verbiage on your goodwill correspondence), it will show on your report as Paid in Full, which is better than settled and certainly WAY better than collections, but you will have a near impossible time getting it off until it drops off in a number of years. PFD is best! If you need help with goodwill letters, there are a lot of them. Most collectors will not offer this or agree to this on the first ask. With some of mine, I had to write 3-6 emails, make numerous phone calls and send snail mail letters. I kept a spreadsheet to keep track. This process will take a couple months unless you get really lucky. Beg, beg, beg. Be super humble. 


What if they wont agree to a PFD?

Do research. Some agencies are known for being more or less agreeable to PFD. Still try your hardest, but if you still can't get it off, go ahead and PAY IN FULL. Sometimes they will magically disappear in a couple months anyway! Not always - - but sometimes. If you paid in full and they don't drop off after a couple months, start reaching out to the agency again and kindly and humbly tell them about your goals and how this is holding you back, ask them kindly to consider removing it since it has been paid in full, etc etc. 

 

 

Sidenote

If you haven't checked out Dave Ramsey, he really is worth a try. I think someone with your situation and income could be wildly successful with his program. The first thing Dave would pound on you about is those cars. If you could get out from under them, it would be a game changer. Those car payments could easily be someone's mortgage payment on a NICE home! Getting out from under them would give you an extra $1,200 a month on your debt cleanup. 

 

You stated you'll be paying your consumer debt off in the near future - WHEN?!!!! You should pay that all off in the next month, TOPS. Then, I would recommend cutting those cards up! You can keep the accounts open if you'd like as closing them will drop your scores, but I would cut them all up. Sometimes you can get a score bump if you show 1-9% utilization on one card... if you play that dance, be careful.. only use one card to do it and always PIF each month.

 

It's awesome you have $15K saved, but isn't that just like the universe that you also have $15K in collections? I would IMMEDIATELY pay off ALL OPEN/Active collections/ trying to PFD. With that car, since it's $9K, it's worth seeing if you can settle and/or PFD. That's going to be a tricky one, so make sure to keep at least $9K cash handy, while you're dealing with that. 

 

Per the Dave-cult, keep $1K Cash as a baby emergency fund. If you decide to get out from under that car debt, I'd get some beaters with some of that $15K and the collections you don't pay can get cash flowed with the money you're not tossing away on car payments each month.

 

If you decide to keep all your cars, you're going to want to start sacraficing more and just living on nothing for the next year. You do that and you might be able to pay off your auto and student loans by Spring 2018 and then start saving for a downpayment on a house... maybe looking at Spring 2019 to buy? You could really kill it with your money with a Dave inspired plan along those lines.

 

 

I know that's a lot... probably too much and in the end, you do you, but there's my free advice Smiley Wink 


12/23/14: 536 | 11/8/16 680
MAJORS: $4.5K Gap Visa, $4K Cap1 QS, $3K Southwest, $2.5K BOA, $2.5K Discover, $1K Chase Freedom, $750 Citi Best Buy, $500 Cap1 Platinum, $500 BuyPower GM, $300 US Bank H-D STORE $1K Macy's, $2K VS, $600 Home Depot, $300 Old Navy, $250 Kohl's, J Crew, Venus $1,800 Care Credit LOANS $10K Ally Auto
Contributor
Posts: 174
Registered: ‎04-17-2014
0

Re: First-Time Homebuyer looking for advice

Oh, and Sbrooks1 is right! Secured Cards can be GREAT and since Average Age of Accounts and Inquiries are tough to grind on, I would say the earlier the better on that step. The best cards I found in my journey was the Cap1 Secured and an in-store, in-person app for a GAP Store Card. After 6-12 months, they sent me an unsecured, Visa with $4,500 limit with no extra app or hp on my credit. 

 

My biggest mistakes in my repair journey:

 

- Paid a Defaulted Student Loan in Full, instead of rehabbing

- To many random store and secured cards as I was just credit hungry to try to get any lines I could.... unfortunately that KILLED my Average Age of Accounts and Inquiries and it's going to take me a couple years to recover from all that apping and all that plastic. Be stingy about what cards you pick / how you use your hard pulls on your credit report. 

 

 


12/23/14: 536 | 11/8/16 680
MAJORS: $4.5K Gap Visa, $4K Cap1 QS, $3K Southwest, $2.5K BOA, $2.5K Discover, $1K Chase Freedom, $750 Citi Best Buy, $500 Cap1 Platinum, $500 BuyPower GM, $300 US Bank H-D STORE $1K Macy's, $2K VS, $600 Home Depot, $300 Old Navy, $250 Kohl's, J Crew, Venus $1,800 Care Credit LOANS $10K Ally Auto
Contributor
Posts: 174
Registered: ‎04-17-2014
0

Re: First-Time Homebuyer looking for advice

Sorry, I keep thinking of ideas! Do you have any late pays? I was able to write goodwill letters and get my only 2 late pays removed. I saw a nice jump after going to 100%!


12/23/14: 536 | 11/8/16 680
MAJORS: $4.5K Gap Visa, $4K Cap1 QS, $3K Southwest, $2.5K BOA, $2.5K Discover, $1K Chase Freedom, $750 Citi Best Buy, $500 Cap1 Platinum, $500 BuyPower GM, $300 US Bank H-D STORE $1K Macy's, $2K VS, $600 Home Depot, $300 Old Navy, $250 Kohl's, J Crew, Venus $1,800 Care Credit LOANS $10K Ally Auto
New Member
Posts: 7
Registered: ‎03-17-2017
0

Re: First-Time Homebuyer looking for advice


mamatried wrote:

That's a great income so that should help you progress faster than some others in similar situations. That also makes your DTI less scary since you do have a LOT of out-go every month.

 

580 for the hubby is a good mini goal, but view it more as a stepping stone. Although FHA's guidelines go down to 580, you're really going to need mid-scores of 640+ to get an FHA mortgage. USDA Rural Development has a great program if you're in a rural qualified area, but depending on your county, your income may be too high. As you probably already know, you're going to need 680+ and 5% down to go conventional.

 

I take it you're working off of Free Credit Report Pulls or Credit Karma in order to have those ballpark scores? Does your hubby have collections or late pays? No credit would be a zero credit score with a lender with manual underwriting can work with; but he's got some sort of baddies holding him down if he's 500's. If you haven't pulled detailed reports on BOTH of you, I would do that to make sure there aren't any skeletons hiding.

 

How soon are you hoping to buy? I would say it's feasible to get your scores over 640 in 4-6 months of HARD GRINDING, but the FICO is a little diff than Credit Karma, so I would guess you're on a longer path.. 

 

 

Your Questions

My question is how likely is it that we will have to pay off the collections before we can close on a home?

You will have to pay them. After 2 years, they'll still show on your credit report (up to 7 years collections, 10 years for judgements) 

 

My other question is if we have to pay collections, which route do we need to go to ensure we do this correctly?

PFD is best! Try very very very hard to get PFDs for any open or old collections. The first time you see a PFD drop off your report, within 4-6 weeks, if not immediately, you'll see big score boosts. You can try to settle / PFD, but I found best success with PFD when I agree to pay the FULL amount. Every collector is different.

 

Can we pay a settlement amount on the debt?

Yes, you CAN settle, but it will show on your report as SETTLED for less than original debt which is less desireable. This is one notch up from deadbeat collections item on a credit report. I do not recommend it for your situation. I would only recommend it for someone who say owed $25K to Amex, but had a $30K income.. if they had an offer to settle for pennies on the dollar, it would make more sense for them to settle and move on. You make enough and your debts (although big), are debts you can pay. 


Do we need to make sure its a PFD?

YES! If you do not make it crystal clear that the expectation is PFD (but don't use PFD or Pay for Delete verbiage on your goodwill correspondence), it will show on your report as Paid in Full, which is better than settled and certainly WAY better than collections, but you will have a near impossible time getting it off until it drops off in a number of years. PFD is best! If you need help with goodwill letters, there are a lot of them. Most collectors will not offer this or agree to this on the first ask. With some of mine, I had to write 3-6 emails, make numerous phone calls and send snail mail letters. I kept a spreadsheet to keep track. This process will take a couple months unless you get really lucky. Beg, beg, beg. Be super humble. 


What if they wont agree to a PFD?

Do research. Some agencies are known for being more or less agreeable to PFD. Still try your hardest, but if you still can't get it off, go ahead and PAY IN FULL. Sometimes they will magically disappear in a couple months anyway! Not always - - but sometimes. If you paid in full and they don't drop off after a couple months, start reaching out to the agency again and kindly and humbly tell them about your goals and how this is holding you back, ask them kindly to consider removing it since it has been paid in full, etc etc. 

 

 

Sidenote

If you haven't checked out Dave Ramsey, he really is worth a try. I think someone with your situation and income could be wildly successful with his program. The first thing Dave would pound on you about is those cars. If you could get out from under them, it would be a game changer. Those car payments could easily be someone's mortgage payment on a NICE home! Getting out from under them would give you an extra $1,200 a month on your debt cleanup. 

 

You stated you'll be paying your consumer debt off in the near future - WHEN?!!!! You should pay that all off in the next month, TOPS. Then, I would recommend cutting those cards up! You can keep the accounts open if you'd like as closing them will drop your scores, but I would cut them all up. Sometimes you can get a score bump if you show 1-9% utilization on one card... if you play that dance, be careful.. only use one card to do it and always PIF each month.

 

It's awesome you have $15K saved, but isn't that just like the universe that you also have $15K in collections? I would IMMEDIATELY pay off ALL OPEN/Active collections/ trying to PFD. With that car, since it's $9K, it's worth seeing if you can settle and/or PFD. That's going to be a tricky one, so make sure to keep at least $9K cash handy, while you're dealing with that. 

 

Per the Dave-cult, keep $1K Cash as a baby emergency fund. If you decide to get out from under that car debt, I'd get some beaters with some of that $15K and the collections you don't pay can get cash flowed with the money you're not tossing away on car payments each month.

 

If you decide to keep all your cars, you're going to want to start sacraficing more and just living on nothing for the next year. You do that and you might be able to pay off your auto and student loans by Spring 2018 and then start saving for a downpayment on a house... maybe looking at Spring 2019 to buy? You could really kill it with your money with a Dave inspired plan along those lines.

 

 

I know that's a lot... probably too much and in the end, you do you, but there's my free advice Smiley Wink 


Thank you for taking the time to reply!! I appreciate all of the advice.

 

And to answer your questions....The middle Mortgage scores I provided was from MyFico. We have the Ultimate plan. I wanted to make sure I had accurate scores. We are wanting to buy in 6-8 months but that depends on how much collections we have to pay vs how much we will have saved for DP and Closings costs. 

 

My husband does have collections on his credit: 

1. Joint collection for an old apartment lease of $2,022 from 2014.  

2. Individual At&T collection of $804.00 from 2014.

3. Individual HSBC card of $436 from 2012.

 

 

We have been talking about what to do with the car payment situation. The $23,000 is my car that I bought in April of last year with a HIGH interest rate. Because of my job, I have to have a reliable car and jumped into this loan. We werent even thinking about a home at the time, unfortunately. I want to refinance that loan but wanted my scores to be a bit higher first and also was told not to do ANYTHING right now if we are anticipating buying a home. 

 

The other 2 vehicles are my husbands and unortunately we would be upsidedown if we sold it. Again, we didnt want to go shopping around to try to trade them for ONE vehicle with a cheaper payment since our scores arent very high and we dont want to ding our credit while wanting to get a mortgage.

 

We had an agressive plan of action to have all open cards paid off by May. However, if we need to work on paying off collections, should we not be as agressive in paying off the cards and work on the collections first? I ask because the scoring model says if I pay down small amounts on my open credit over a longer period of time, my scores will see a dramatic rise. Is that the better route to take if we have this long before a mortgage?

 

 

New Member
Posts: 7
Registered: ‎03-17-2017
0

Re: First-Time Homebuyer looking for advice


mamatried wrote:

Sorry, I keep thinking of ideas! Do you have any late pays? I was able to write goodwill letters and get my only 2 late pays removed. I saw a nice jump after going to 100%!


Good question!! The $9k car loan is a joint account and it is the only account showing lates. Unfortunately it is with Santander and the way they do business is very confusing to a consumer! We were legitimately late once in 2015. However, we were never notified when we made a payment arrangement that we would be assessed so much interest and fees and we continued to make regualr amount payments not knowing we shouldve paid fees and interest.

 

The only way we found out we owed anything more (interest and late fees) was when it started hitting our credit in April of 2016.  Each time we made a regular payment it would go to interest and late fees. Our actual payment started becoming past due because of how they were applying the payments. I immediately paid over $1000 in mid 2016 to bring the account current. I explained the situation to the representative and told her that clearly it was a misunderstanding and that I just paid over $1000 to bring the account current and she said there was nothing they could go about the derrogatory credit remarks. It now shows as a total of 6 lates for that account :/

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