Looking for Mortgage Mid-Summer

[Xtracho]

Pretty new to the site and learning the ropes. So far quite impressed with the great info presented and particularly the experiences of those that are similar to ours. I will try to provide the comprehensive information requested in the sticky post so as to get the best advice.

Credit

1. FICO scores as of 4/16/2014 - EXP - 590, EQF - 593, TU - 627. (On 03/12/014 the FICO's were: EXP - 566, EQF - 559, TU - 613)

Negatives on Credit Report::

Charge off: 1 credit card closed 10/2009. Balance $401

Collections: 3 all three are medical collections from 2011 when I underwent open heart surgery. Total amount in collection: $3500

Late Payments: 1 late payment on car note 31 months ago. 30 days late because, again, I was recuperating from heart surgery.

Judgements: 1 for $10,500 awarded to a vindictive former landlady. We were not evicted nor were we behind on any rental payments. She was just an ass that had a lawyer. She claimed we damaged the property, I was offshore on my vessel when the judgment was rendered. I appealed but lost.

Public Records: 2 NTFL. Both of which will be withdrawn in May under the IRS Fresh Start Program because we are under an existing Direct Debit Installment Agreement. We have been paying on the liens since June, 2013, never missed a payment, and entered into the Direct Debit Agreement in February. We will file the required IRS forms for Withdrawal of NTFL after our third consecutive month (April) under the Direct Debit Agreement. Outstanding Balance Due: $8000.

2. Income: Gross Income as reported to IRS for tax year 2013: $145,000. Tax year 2012: $127,500. income is from my employment. I am the Captain of an Anchor Handling Tug and Supply Vessel working for an American Company in the country of Brazil. I have been with the same company for 4 years and have almost 30 years in the industry.

3. Monthly Debt: Installment Accounts: I have 2 credit cards with a total available credit of $3900. Current balance of $2200. This will be paid to near $0 before I begin talking with a mortgage officer. We just completed paying off a 60m month auto loan with only the one 30 day late I mentioned earlier that occurred in September, 2011. Both my credit cards are paid as agreed.

4. Assets/Reserves: I plan to make a 10-15% down payment on the residence. Additionally, assuming that I can qualify for a conventional loan, I will also pay monthly towards the principal to get below the 80% LTV in order to avoid PMI.

5. Property: Located in Bay County, FL and will be single family primary residence. Purchase price will be in the range of $300-350K.

6. Transaction: Purchase and would like to come in at an interest rate in the 4.75 - 5.2% range.

I am operating under the assumption that the Withdrawal of the NTFL's and paying the credit card balances to near $0 will get my FICO into a manageable range for a conventional mortgage. We have been renting in the same home for almost 4 years and have never missed or been late on any monthly rent. The management company that handles the property has already indicated they will provide a letter to that effect.

So there you have it. Again, if I have omitted anything or clarification is necessary please let me know. Thanks so much for the expert advice.

[Muschock]

Im definitley not an expert but I think your judgement would need paid or set up on a payment plan for a yr. After your medical collections are paid you can send a GW letter to see if they will delete. Your score will for sure go up when you pay off your credit cards. I got a 30pt bump when I paid all of mine off but one...which I left at 5% uti.
Best of luck!!

[Xtracho]

Thanks Muschock. I suppose the experts do not care to respond. Oh well....off to look somewhere else for some helpful guidance.

[TurboFX]

Your debt to income looks good for that loan amount. The judgement will be an issue. It will mostly have to be satisified. I'm assuming it's atleast 4 years old since you've been in the same house for that long. Judgements usually stay on for atleast 7 years. The underwriter might want those outstanding collections cleared as well. Credit scores are another issue. Once the IRS liens go off, your scores should improve. You mentioned "we", so if your spouse/partner is going to be on the loan their credit will be a factor as well. If they have a credit card
10-15% down payment is good, but you would need to have 20% to avoid the mortgage insurance. Most lenders will require you to have mortgage insurance for atleast 2 years. You need to check with them. I know a few credit union such as Navy fed and possibly Penfed will allow you to go over 80% with no mortgage insurance, but rates will be slightly higher. The better your scores are the more flexibility you'll have. You might have to use a portion of your downpayment and pay off the collections and judgements and put a lower down payment. Wait

[TurboFX]

Sorry accidentially hit post when my phone slipped out. Your main issue is getting that credit score up. Perhaps being added as an authorized user on your partner's credit card with a long good history might help. You only have 2 credit cards with CL of around 6k seems pretty thin. The only real challenge for you is your credit which can be repaired with time.

The judgements and collections can be dealt with once the underwriter reviews your file and tells you what needs to be satisfied. You might have to consider an FHA loan with mortgage insurance and then refi out once your credit improves.
My bk was discharged 4/13 and will have to go with an FHA next year and refi out 2 years after that. Rates will most likely be higher, but with MI removed, will probably balance it out. I might even put off buying all together if the housing continues to increase at this ridiculous rate of 20% a year here in CA.

[Xtracho]

Thanks for the advice and look forward to more. I am thinking about approaching this step by step.

1. April 30th will file IRS form 12277 to have the NFTL's withdrawn and removed from the credit reports. I would think to see a significan spike in all 3 FICO scores once they are gone.

2. Of course, as I mentioned in my original post. The two credit cards I have will be paid to near zero by the end of May. That should also invite some minimum increase in the FICO scores.

3. I'm not so sure I want to apply for any additional credit cards at this juncture as I would think my FICO scores would be impacted negatively. Of course that is just an assumption on my part and I could be wrong.

4. I haven't really thought through how to deal with the judgment. It's just a little over $10K. And I loathe the idea of paying this vindictive former landlord a penny. Since she won the judgment the house we formerly rented from her has been foreclosed on. So she is ruined. Perhaps this would be an opporunity to offer her a pittance of the judgment amount to make it go away. I suppose that is a question best answered by an attorney.

5. The medical collections amount to around $3500 with one big one of $3200+. The rest are small and could be paid easily. But I would want to negotiate with the collection company for removal of those items once paid. With regards to the big collection account, perhaps an offer to the collection agency could be considered.

And you are correct. The "we" is my wife and myself. However, her credit is in worse shape than mine. We are jointly named in the two NTFL's so removal of those will assist her as well. She does have one credit card with a $1000 limit. Again, just thinking out loud. I apply for the mortgage alone and after her credit has recovered, refinance with her on the loan as well. We did recently pay off a student loan she had. I have not had the opportunity to check her most recent FICO scores. I'll do that today.

I'm going to need some advice and answers moving forward. Thanks so much for your response TurboFX. Please feel free to chime in with any further guidance you may feel relevant.

[TimeToRecover]

The only item I am going to comment on is #3.  Do not apply for new credit.  there should be no new credit within 6 months definitely and 1 year better.

[TurboFX]

If your credit doesnt improve enough to qualify for a conventional loan then an FHA would be a good alternative and then refi once credit improves. Either way the collections/judgement will most likely to be addressed. If you can negotiate a lower amount for the judgment you might be able to go to the court and have that removed. Good luck.

[TurboFX]

You might have to go with a lower down payment and use some of that money to take care of the collections/judgements. Then refi out and put more money down to get rid of MI.

[Xtracho]

Thanks again for useful information. We may have to push our goal of getting the mortgage end of summer or after Labor Day. We shall see. But based on a recent report from TU on a dispute I sent in last month, it appears some progress has been made. 4 deletions on the TU report from the dispute. That leaves only the one medical collection account of $3200. And again, I know it may not be relevant but it was because I was out of work and recovering from Triple Bypass Surgery. The final report from TU came yesterday so I figure in a short time I'll see how those deletions affect the TU FICO score.

When I return home Brazil next month I'll see about consulting an attorney about the judgment from the landlady. Hopes would be that having had her rental prop. foreclosed on she would welcome a settlement offer for less than what the judgment is.

Keep the advice coming folks.....I really appreciate it.