I have a recent collection (says Date Assigned Jan 2013). Yea, it's mine and I'm kicking myself since I've hadn't had a collection on my account in over 10 years and now I have one at the worst time. it's also showing as paid off. I tried to PFD, but before I did that, I actually paid off the OC, hoping it wouldn't have gone to collections. Well it did and they apparently sent the payment to them. So now I'm going to probably GW them to remove it.
The question now is, should I solely concentrate on removing this new collection or is it possible I could get an approval from a lender? I've seen from other posts that generally lenders want 12 months or more of no lates or collections, but appears most of that info refers to FHA. I want to obtain a FHA loan, but I'll take a conventional loan if they allow more leeway on the recent age of the lates/collections.
My current scores aren't that great: TU: 618, EQ: 627, EX: 583. However, I was at 60% utilization when these scores were grabbed and I recently paid off most of my credit debt (should be 2% or 3% utili now). So I'm expecting a bump and I believe i should hit above a 640 mid with the util down.
Regardless of what my FICO scores will end up though, if that less than 12 months collection pretty automatically denies me from consideration, then I rather just save myself the trouble of trying to obtain lending and just focus solely on removing this collection.
Advice greatly appeciated. Thanks.
Bump, maybe I was too wordy. I basically just want to know if a recent (less than 12 months) collection will get me an automatic denial on a mortgage loan. I don't want to wait 9 more months (dofd i believe is Jan) if I don't need to.
I think it may depend on the lender but someone with more knowledge will correct me if I am wrong. Good luck!!
What type of collection is it?
Credit card? Auto Loan? Medical? Mortgage? as examples?
It's a cell phone bill (AT&T Wireless).
Yea that's what I'm worried about. i.e. Getting preapproved but getting denied in the UW stage. The reason being is that I want to buy a new construction home and I'd hate to go through all the construction and design center phases only to be denied when the loan goes into underwriting. I'd lose out on my earnest money desposits not to mention the time wasted.
You can just apply twice. Apply for the loan through a Broker that may know some lenders that may work with you. Have him run your credit and ask him to send the file to his UW to look over to see if you can proceed. If yes, then go to the new construction place and start the building. If they want you to get qualified through their lending company and the LO feels okay proceeding with the collection, then proceed. If the second app occurs within 2 weeks of the first, it will count as one inquiry and your score will not be dinged again. If things fall through with the construction lender, you can go back to the first lender. But your credit score has to hold up against the first pull and final pull and maybe a third intermediate pull if the apps are too far apart. But I would bet you will need to stay with the Broker who first preapproved you as he would probably be working a special non mainstream lender that has requirements that are hard to find with another lender. This way you will know if it is truly possible right now.
Thanks for the info!
Also, my Experian Plus score jumped 77 points (723 now!)! I know it's a FAKO but I can't see how it could've jumped that high only by paying down my credit cards (I paid it down from around 60% to 30%). So hopefully it was due to the removal of the collection from my account. I'm going to wait a few days to make sure the 'deletion' gets posted to all credit bureaus. Hopefully, my scores and report confirm what I hope happened with the 77 point score jump. In any case, I'm going try what you mention above within a couple months. I'll have enough for my down payment (though only need earnest money for new construction) and my credit card util should be under 20% by that time.
Thanks for all the help so far and I'll keep updating this thread when get more news.
I'd lose out on my earnest money desposits not to mention the time wasted.
The only way you wouldn't be able to get your deposit refunded is if you did something to specifically sabotage the loan. In our case, we had to get a conditional approval, and pay $5,000 down on the house to get construction started. The only way we wouldn't get that $5,000 back is if we went out and bought a new car, or $10,000 in furniture and clearly caused ourselves to get denied the loan.
If the builder actually would start construction for you, then you would have had to already clear some major hurdles. They want a pretty firm commitment from a lender that you're going to get a loan pending verification of everything you've supplied as well as no new credit, etc.