Trying to Get Approved For FHA Loan

[Vee25]

Hello, I believe this is my first post and I have been reading the information on these forums for the last 4 years.  My situation is that I applied for a mortgage with TowneBank Mortgage last month and currently working to settle the last collection account I have, Fair Collections & Outsourcing (FCO) which has a balance of $7K.  Some bogus fees on an apartment lease. 

Anyway, the collection is from 10/2008, due to drop off 9/2015 but I need to pay it.  FCO will settle for $5692 which is still higher than what I really owed. I have asked the lender about finding out from the underwriter if it would be possible to be approved, if I made a payment arrangement with FCO for the settlement amount.  I have tried on several occasions via email and certified letters to settle for $2300 and $1500 but they are not budging.  Any advice would be helpful.

These forums have been the best source of information in rebuilding my credit from a score less than 400 to over 640 and continuing to improve every month.  Thanks in advance.

[DWill02]

Im sorry no one has responded, it has happened to me a couple times. I wish I could help. But I am sure you will find the answer! Many blessings!

[cmd0906]

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@Vee25 wrote:

Hello, I believe this is my first post and I have been reading the information on these forums for the last 4 years.  My situation is that I applied for a mortgage with TowneBank Mortgage last month and currently working to settle the last collection account I have, Fair Collections & Outsourcing (FCO) which has a balance of $7K.  Some bogus fees on an apartment lease. 

Anyway, the collection is from 10/2008, due to drop off 9/2015 but I need to pay it.  FCO will settle for $5692 which is still higher than what I really owed. I have asked the lender about finding out from the underwriter if it would be possible to be approved, if I made a payment arrangement with FCO for the settlement amount.  I have tried on several occasions via email and certified letters to settle for $2300 and $1500 but they are not budging.  Any advice would be helpful.

These forums have been the best source of information in rebuilding my credit from a score less than 400 to over 640 and continuing to improve every month.  Thanks in advance.

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This could hurt you in underwriting. If by chance it doesn't,  a percentage of the debt would be calculated in DTI.

[DallasLoanGuy]

many lenders wouldn't need for this to be paid.

have you tried another lender?

were you approved thru automated?  or is this a manual underwrite?

[Vee25]

Thanks DallasLoanGuy.  I believe the loan is being manually underwritten. The LO asked for explanation letters yesterday and I am going to explain what happened, how I have been fixing my credit and more responsible now by saying No to my family members and staying focused on being credit responsible.  I will also state what I am doing currently to make sure it does not happen again.

[DallasLoanGuy]

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@Vee25 wrote:

Thanks DallasLoanGuy.  I believe the loan is being manually underwritten. The LO asked for explanation letters yesterday and I am going to explain what happened, how I have been fixing my credit and more responsible now by saying No to my family members and staying focused on being credit responsible.  I will also state what I am doing currently to make sure it does not happen again.

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no

i do NOT want to hear about how hard you have been working to 'fix' your credit.

i want to hear:

1. what happened?

2. how did you deal with it?

3. what steps have you taken to assure that it is unlikely to re-occur?

[Vee25]

I saw those same questions on a post. I will definitely answer those questions in my letters. Thanks.

[Vee25]

So here I am again, loan is in underwriting, most likely for the final time, since my credit scores have improved by over 20 points, yet the LO still wants to know about Fair collections & Outsourcing (FCO).  I have called the original creditor, left messages for the property manager, and spoke to the assistant to the CEO asking for a payment arrangement since my loan will not get approved without one.  No one is in the office, but the assistant did state that I would receive a call next week, yet I am supposed to close next Thursday. (Don't see this happening)  I am so frustrated and I am about to give up.   What can I do?  I feel loyalty to this lender because she has been working with me for 2 months.  Do I try again with another lender?  I'm afraid, since I locked at 4% and basically would have to start again and give up the house since the seller was frustrated with my extension because of financing.  Any suggestions?

[ShanetheMortgageMan]

For FHA, non-medical collections either need to be paid in full, put on a payment plan, or 5% of the balance will be used as a monthly payment when calculating your debt ratio... so perhaps if they use 5% of the balance as the monthly payment then your debt ratio would be too high to qualify?  If so, then that would explain why they want a payment arrangement to be made since that payment amount could be lower than 5% of the balance and allow you to qualify. 

Are you not able/willing to pay the $5692 that FCO said they'd settle for?  They may be holding out if they know your mortgage company is requiring it, since they are the obstacle between you and being able to qualify for a mortgage.  Make sure you don't mention a thing to FCO about this being in relation to qualifying for a mortgage.

[Vee25]

Thanks Shane. I cannot afford to pay the 5692 but I did speak to assistant to the CEO of the original creditor who stated that someone would call me to work an arrangement with FCO. So if I can make a payment arrangement (will settle for 3k since OC wrote it off) then I believe I will be approved. I will be calling Monday morning, I'm not waiting until they call.  I spoke to the LO late Friday, and she stated that a 320 payment has been factored with DTI. I'm working real hard it done, I'm almost there. Btw, have not mentioned a mortgage to FCO or original creditor. Thanks again Shane.