Hello BIG question.

[lilman22]

My soon to be husband had a business go under in 2009.  He is over 40,000.00 in debt, and it shows on the credit report as in collection.  My question is will he have to wait the full seven years to apply for a home loan?  He makes 80,000.00 a year, and his credit is not too bad.  Rising fast because he is paying off credit cards, and really keeping up with it.  We are tired of apt. living and ready to buy, but I'm afraid we might have to wait another three years or so.  Am I right? 

I know I need to ask a lender, but have not done that yet.  Mainly because I am afraid of what they will tell me..lol.

Thanks for any input.  I really wanted to ask someone here, as it looks like ya'll know what you are talking about.

Charlene

[lilman22]

My husband has an outstanding debt of 40,000.00 because of a failed business four years ago.  Will he have to wait the full seven years for it to fall off the credit report to get a home loan?  I know he probably needs to speak with a lender, but he has yet to do that.  I am just tired of apt. living!! 

This debt has gone into collections.  I don't know much about scores, but his is 625, 705, and 680.  His scores are rising pretty fast because he is paying off credit cards, and making timely payments.

Anyone have any idea?  I am thinking we will have to wait until 2016, since this happened in 2009. 

Thanks for any info.

Charlene

OH....I hope I am not posting in the wrong place.  This seems to be about auto financing only.  Still...if anyone can answer...much appreciated.

[Gunnar419]

Will your husband have the $40,000 completely paid off by the time you apply for a mortgage, or are you just hoping that debt will disappear after seven years?

An unpaid debt will fall off your husband's credit reports, but when you apply for a mortgage, they'll ask if you have outstanding debts, and if your mortgage is above a certain level ($150k, I think, but doublecheck), the lender will have access to records of unpaid debts going back much longer than seven years.

You wouldn't necessarily have to wait seven years from the DOFD of a bad debt to get a mortgage, but you'd have to deal with the debt, one way or another, in the mortgage process.

I realize I may be misunderstanding your question, though. If your husband can pay that debt off or even settle it, you may not have to wait to get a mortgage.

[camille11]

No, it is in collection and he can't pay it at this point, probably for at least six months, along with the lowering of credit cards.  How would they do this during the mortgage process?  He makes enough I'm thinking it could be settled somehow.

Excellent answer by the way!

Thanks so much!!

Charlene

[lilman22]

By the way...I was signed in under his name when I answered you before.

Thanks!

[sunnysideup]

What do you mean by lowering of credit cards?  Are those going to be paid off or paid down?  How is all of this debt reporting on his credit reports?  Does he have any judgements against him - any type of public judgements on his credit report?  Bankruptcy or foreclosures? What are his current scores? Those are all things to consider.....it might help if you give a bit more of the story without giving any personal or identifying details. 

[Peter1142]

If the collection is paid then it is no longer any kind of issue, assuming that his credit score remains sufficient. Sometimes paying these things off can hurt the score via an updated date on the TL

[coterotie]

This is also the reason why you should have your business properly structured.  Likely some of the debt should have been in the name of the business and you could have kept that off the personal credit report while you took care of everything that would hit that.  The creditors would have also been more likely to take reduced payments/settlements as well.  Finally he could have bankrupted the business, made a payment plan and had nothing hit his personal report.

My advice is to always pay a little money up front for good legal and accounting advice BEFORE you start or expand a business.

[camille11]

Yes, I know this.  Shouda' coulda' woulda'....we ALL learn.  I was young, and learned the hard way.  BUT I shall recover.  Cheers!