What would you do?

[Anonymous]

I'm curious what you all would do in my situation. I have over 15 years of spotless, excellent credit, including two mortgages with no missed payments. But recently got a bit overwhelmed in my new job and trying to go paperless and missed a couple payments accidentally. Both were paid up immediately when I found out but the damage to my credit score was significant. My hope is with some good will letter writing, and given my previous history I can at least get one, if not both, of the bad items removed. 

My dilemma though is whether I should wait to buy a home and see if I can improve my credit or buy now while the rates are at historic lows. I'm already approved for my loan but I'm so frustrated at the extra I have to pay in interest rate due to the drop in my credit. I'd only have to get it back up about 30 points to get into the next tier again. Obviously no one knows the future, but most people are saying that it's likely mortgage rates are going to go up. I'm not sure it makes sense to take a chance that I can fix this issue, only to end up with what could be the same rate anyway. But if they stay about the same, it could be a pretty big savings. 

What would YOU do? 

[pstx]

I was in a similar situation when I was buying my house two years ago.

I found a great deal from a motivated seller, for a house I'd be happy living in forever with my family.  But a pesky $100 medical lab bill (you know one of those ones where they send you three bills after a dr's visit and you think you already paid, but it is actually a separate bill?) - that ended up getting ignored and turned over to collections.  

So, that $100 late bill probably cost me about .75 bps  (at the time market was about 4% and I ended up with 4.75).

I bit the bullet and bought the house.  Now two years later I'm refinancing at 3.5%, and the little bit extra premium I paid at the time is totally worth it in my life.  Granted, I paid for the $100 lab bill twenty times over, but it was worth it for me to buy my house when I did versus waiting.

I guess the biggest take away should be to not let FICO/interest rates drive your decision.  Make a good decision for you (is this a house you want to stay in for a while, can you afford the payments at slightly higher rates, is it a good deal compared to comps in the neighborhood, what is the overall economic environment in your market like, etc.)

When I bought my first house about 12 years ago, my interest rate was 7.25% and I was excited because that was low at the time.  Focus on the house, not the rate.

In general I think that prices have bottomed out.  In my market we're already off the bottom, but other markets may vary.

Good luck!

[Anonymous]

Thanks, that was kind of my feeling as well. I have found a home at an amazing price, a home I could spend the rest of my life in really. So yeah, I'm moving forward on the purchase. 

I did at least get one creditor to agree to purge a late payment. I don't know though if just that one would be enough to get my credit back up high enough, and it's going to take a couple months to show up regardless. 

[pizzadude]

I don't see any reason to wait on sending GW letters to remove the late payments. Even if you don't buy a house it will still be worth it to improve your FICO® score.

[Anonymous]

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@pizzadude wrote:
I don't see any reason to wait on sending GW letters to remove the late payments. Even if you don't buy a house it will still be worth it to improve your FICO® score.

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Huh?? Not sure I follow you, how would I remove the late payments *without* writing good will letteres? And yes, of course I still plan to try and get them revmoed regardless of whether I buy now or not. The question was just whether it would be better to wait until it did get fixed.