Pay default SL at closing?

[Anonymous]

Hi all....Like so many others, I am planning to purchase a home soon. 

However, I have a defaulted student loan which needs to be addressed.  I have the funds and I'd like to pay the balance of the loan in a lump sum.  The question is WHEN should I pay it and how will it effect my chances for a mortgage approval. 

 I am sure that my name will appear in CAVAIRS when I apply for any govt backed mortgage.  As for the effect on my credit scores, the default is from many years ago.

It has long since dropped from all three of my credit reports as it is past the CRTP.   

So, a few questions:

Do you think having a defaulted loan in CAVAIRS will sink my chances of being approved for a mortgage? 

OR

Will the lender allow me to address the issue at closing?  As in, will I be permitted to pay the defaulted loan balance at closing? 

I'd dearly love to just pay the balance of the loan now to be done with it, but I'm afraid it will impact my credit scores.  The last thing I want to happen is for me to pay the loan and have the payment trigger the OC/CA to reinsert it on my credit reports for another 7 years.  This may be inevitable, and if so, so be it.  After all, I do owe the money.  However, I'd much rather take the hit and suffer the consequences AFTER I've closed on a mortgage.

One thing I do know is this, my research has shown that student loan debt is a whole different animal from other debts.  Defaulted student loans will follow you for the rest of your life.  Spending time on the student loan forum has truly been an eye opener for me! 

Shane, Dallas.......anyone??

Other details should they matter:

I'm thinking of trying for a VA loan

The student loan is the only negative issue with my credit

My FICO mid score is 746

Reserves = $100k plus (AFTER paying the SL in full) 

Outstanding balance of SL = $2,500 including collections fees

[samwise7]

According to FHA guidelines they cannot insure your mortgage if you have any outstanding federal debt (Student Loans, IRS) in default, and the lender will not approve.  I imagine USDA is the same, and conforming will probably have stricter guidlines. 

Paying them off will allow you to clear CAIVRS.  Mine came off approximately 3 weeks after paying through a direct consolidation loan.  You can check the status of any federal student loans by loging into the National Student Loan Database.  http://www.nslds.ed.gov/nslds_SA/

[WannaHouse]

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@Anonymous wrote:

Hi all....Like so many others, I am planning to purchase a home soon. 

However, I have a defaulted student loan which needs to be addressed.  I have the funds and I'd like to pay the balance of the loan in a lump sum.  The question is WHEN should I pay it and how will it effect my chances for a mortgage approval. 

 I am sure that my name will appear in CAVAIRS when I apply for any govt backed mortgage.  As for the effect on my credit scores, the default is from many years ago.

It has long since dropped from all three of my credit reports as it is past the CRTP.   

So, a few questions:

Do you think having a defaulted loan in CAVAIRS will sink my chances of being approved for a mortgage? 

OR

Will the lender allow me to address the issue at closing?  As in, will I be permitted to pay the defaulted loan balance at closing? 

I'd dearly love to just pay the balance of the loan now to be done with it, but I'm afraid it will impact my credit scores.  The last thing I want to happen is for me to pay the loan and have the payment trigger the OC/CA to reinsert it on my credit reports for another 7 years.  This may be inevitable, and if so, so be it.  After all, I do owe the money.  However, I'd much rather take the hit and suffer the consequences AFTER I've closed on a mortgage.

One thing I do know is this, my research has shown that student loan debt is a whole different animal from other debts.  Defaulted student loans will follow you for the rest of your life.  Spending time on the student loan forum has truly been an eye opener for me! 

Shane, Dallas.......anyone??

Other details should they matter:

I'm thinking of trying for a VA loan

The student loan is the only negative issue with my credit

My FICO mid score is 746

Reserves = $100k plus (AFTER paying the SL in full) 

Outstanding balance of SL = $2,500 including collections fees

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Most lenders are fine with paying it off at closing. It is true you can not be approved with any OUTSTANDING federal debt, but as long as you can pay it off in full, you SHOULD be okay.

Good luck!!

[Anonymous]

Bumping this up....