Want to build a home in 2012!! HELP!

[mrordinary]

I hope it's ok that I posted this twice....I realized it may be a better question for the mortgage gurus...

I have had a lot of credit issues in the past. A foreclosure (12/2008), several charged off CCs, and a couple of collections that have now popped up. My current (2/2012) Equifax FICO (from this site) is 620. My wife's is 559. Income is $80K combined. We are employed full time (me 6 yrs in job, her 4) Our  current credit situation is that we have 2 vehicles in both of our names. One will be paid off 1/2013. We each have a credit card. I have student loans (current) in my name. We will be paying our credit cards down to less than 9% this month. This should help maybe 20-40 points each according to the FICO simulator. When both of our FICOs reach at least 620 (640 for me at least), we want to have a home built. It will take 5-6 months to build the house. The cost is around $185k.

FHA requirements are changing 4/1/12 to require all COLLECTIONS over $1k to be paid or on a payment plan with 3 mos history.My question is this: Only some of our charged off accounts have turned into actual collections....Will underwriters require charged off accounts to be paid as well? I am a little shaky on the differences for underwriting purposes. Alsp our 2nd mortgage was charged off during the foreclosure...Will that be a requirement too? They never came after us for payment that I can remember....Any help is appreciated! We are willing to settle/pay with all creditors if it gets us closer to our dream home!

[mrordinary]

I hope it's ok that I posted this twice....I realized it may be a better question for the mortgage gurus...

I have had a lot of credit issues in the past. A foreclosure (12/2008), several charged off CCs, and a couple of collections that have now popped up. My current (2/2012) Equifax FICO (from this site) is 620. My wife's is 559. Income is $80K combined. We are employed full time (me 6 yrs in job, her 4) Our  current credit situation is that we have 2 vehicles in both of our names. One will be paid off 1/2013. We each have a credit card. I have student loans (current) in my name. We will be paying our credit cards down to less than 9% this month. This should help maybe 20-40 points each according to the FICO simulator. When both of our FICOs reach at least 620 (640 for me at least), we want to have a home built. It will take 5-6 months to build the house. The cost is around $185k.

FHA requirements are changing 4/1/12 to require all COLLECTIONS over $1k to be paid or on a payment plan with 3 mos history.My question is this: Only some of our charged off accounts have turned into actual collections....Will underwriters require charged off accounts to be paid as well? I am a little shaky on the differences for underwriting purposes. Alsp our 2nd mortgage was charged off during the foreclosure...Will that be a requirement too? They never came after us for payment that I can remember....Any help is appreciated! We are willing to settle/pay with all creditors if it gets us closer to our dream home!

[llecs]

Welcome to the forums!

I'd suggest reading the following:

Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

What Steps Do I Take - great for learning the repair process.

and Example letters - PFDs, GWs, DVs, etc.

Certainly check with your lender long before committing to the process, but I'd expect the collections, including the 2nd, to be paid. Bumping for others on the 2nd to be sure. "Collections" is an ambiguous term which encompasses both collection agencies and charge-offs. Before paying them off, read the steps above. Paying off COs and CAs will not improve your FICO scores. However, though PFDs, the scores can improve.

[mrordinary]

Thanks for responding!
And thank you for the links. I have been reading this stuff for awhile. It's a lot to take in. I understand that paying the collection account won't increase my scores. I just figured if I have to pay them, then I need to pay the ones that will be required. I will for sure be trying the PFDs though.

One more question.... The 2nd was charged off. No collection agency or lawyer has contacted us... So who do I pay? It's been 4.5 years btw...

[Anonymous]

Mr-o, I am in the same board. I am talking to 3 lenders right now to see if they can process before April.

[mrordinary]

I read that you only have to get an FHA file/case number before April...is this what you are working on? Oh! And upon closer investigation,the Second mortgage acct reads Closed and Paid. On Exp AND Equifax. So that's a relief. I was looking at an unsecured loan from the same lender (citi). That one is 11k....

[llecs]

On the 2nd, if it reports with a $0 balance, and you didn't pay, then they sold it to a CA. I wouldn't be too eager in finding out who that CA might be. If it reports $0 across all 3 reports, then let it be. But I would save up to have the ability to pay it via a PFD, if it ever reported down the road. Also, opt out from all three reports. Doing so will prevent the CRAs from providing info to any lurking CAs that you applied for a mortgage. Some CAs will subscribe to your CR and may decide to report once they see a mortgage inquiry. A CA could report dropping your scores and your mortgage lender might require you to pay it as a condition for closing. Opting out prevents that flow of info.