Need advice on FHA loan

[Anonymous]

Hi,

I am looking to purchase a house next summer. My scores are 607 593 596. My chapter 13 was discharged July 2016.  Since then I have obtained a car loan, 2 credit cards, fingerhut I had those for a year and have never missed a payment. I'm sure once I pay my credit card down to 30% my score will rise much higher. I have a auto loan which was charged off for 3k should it wasn't included in the Chapter 13. Should I pay it? My DTI is 9%. I make 5,000 a month . 

Will i I have any issues getting a loan? I'm a little nervous, I tried to take out a personal loan with my credit union they basically said I didn't qualify for a personal loan.

Thanks

[StartingOver10]

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@Anonymous wrote:

Hi,

I am looking to purchase a house next summer. My scores are 607 593 596. My chapter 13 was discharged July 2016.  Since then I have obtained a car loan, 2 credit cards, fingerhut I had those for a year and have never missed a payment. I'm sure once I pay my credit card down to 30% my score will rise much higher. I have a auto loan which was charged off for 3k should it wasn't included in the Chapter 13. Should I pay it? My DTI is 9%. I make 5,000 a month . 

Will i I have any issues getting a loan? I'm a little nervous, I tried to take out a personal loan with my credit union they basically said I didn't qualify for a personal loan.

Thanks

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The auto loan was charged off after your discharge from the Bk 13?  It is very difficult to get a mortgage when you have derogatory credit after your Bk discharge. One of the loan officers can give you more insight.  

[Anonymous]

Yes , correct but I have since then got an auto I've had it 1 year no missed payments thx 

[Anonymous]

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@StartingOver10 wrote:

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@Anonymous wrote:

Hi,

I am looking to purchase a house next summer. My scores are 607 593 596. My chapter 13 was discharged July 2016.  Since then I have obtained a car loan, 2 credit cards, fingerhut I had those for a year and have never missed a payment. I'm sure once I pay my credit card down to 30% my score will rise much higher. I have a auto loan which was charged off for 3k should it wasn't included in the Chapter 13. Should I pay it? My DTI is 9%. I make 5,000 a month . 

Will i I have any issues getting a loan? I'm a little nervous, I tried to take out a personal loan with my credit union they basically said I didn't qualify for a personal loan.

Thanks

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The auto loan was charged off after your discharge from the Bk 13?  It is very difficult to get a mortgage when you have derogatory credit after your Bk discharge. One of the loan officers can give you more insight.  

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This is what happened to me.  They stopped sending me a bill because they weren't allowed too and they couldn't talk to me.  I had no idea I still owed as I thought the amount I was paying the trustee was covering the rest.  I figured when they stopped sending me a bill that I had caught up on that end.

Hopefully this doesn't cause me issues as well in obtaining a home loan.

[Anonymous]

My understanding is that you need to have less than $2,000 in collections in order to meet FHA guidelines.  If your collectiions are above that, they include a certain percentage (I think 10%) towards your DTI ratio.  Not a huge number, but it could make the difference between an approval.  

[StartingOver10]

Shanethemortgageman has a sticky devoted to how outstanding collections, charge off's etc is handled if the debt is larger than $2000.  It is here: http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-collection-account-judgments-amp-dispute...

Essentially a capacity analysis is done and 5% of the outstanding deliquent debt is used for a monthly payment....which can be a problem depending upon the debt ratios of the applicants.  Read the sticky.

[kjade1030]

Straight from the FHA guides regarding Ch 13 BK.  The key here is to get the automated underwriting system to give you an approval.  Otherwise, it has to be manually underwritten, and the underwriters will not like that late pay/charge off.  You should call them and try to negotiate a lower payoff in return for them deleting the entire thing from your credit.  That  would be the most beneficial as getting an automated approval with a 2 year old BK is difficult to say the least.

(F) Bankruptcy (TOTAL)
(1) Standard
The Mortgagee must document the passage of two years since the discharge date
of any bankruptcy. If the bankruptcy was discharged within two years from the
date of case number assignment, the Mortgage must be downgraded to a Refer
and manually underwritten.
(2) Required Documentation
If the credit report does not verify the discharge date or additional documentation
is necessary to determine if any liabilities were discharged in the bankruptcy, the
Mortgagee must obtain the bankruptcy and discharge documents.

If you get an approval, you're golden.  Probably just have to write an explanation of what happened and why it won't happen again.  If you get a manual underwrite, you have a problem:

(E) Charge Off Accounts (Manual)
(1) Definition
Charge Off Account refers to a Borrower’s loan or debt that has been written off
by the creditor.
(2) Standard
The Mortgagee must determine if Charge Off Accounts were a result of:
 the Borrower’s disregard for financial obligations;
 the Borrower’s inability to manage debt; or
 extenuating circumstances.
(3) Required Documentation
The Mortgagee must document reasons for approving a Mortgage when the
Borrower has any Charge Off Accounts.
The Borrower must provide a letter of explanation, which is supported by
documentation, for each outstanding Charge Off Account. The explanation and
supporting documentation must be consistent with other credit information in the
file.

That's why I think you should call the credit and try to pay for deletion.