Where do we even start?

[Anonymous]

My husband and I are wanting to buy a modular home to put on some land that we are currently buying. His FICO score is 641, mine is 647.  We will make a combined income this year of approx $70K.  This is quite a bit more than we have ever made.  Here is what we look like: 

 Federal Taxes $250 Balance $3000 Not reported on credit report

 Land payment $350 Opened 06/09  Not reported on credit report  

 Truck loan with a balance of $20K, $500 month. Opened 03/07 never late

 Home loan balance $19K, $400 month.  Opened 03/98 current since 06/05

 CC balance $125 - limit $310 opened 04/07 never late

 CC balance $200 - limit $500 opened 04/07 never late

  Savings $5000

 Medical collection 09/05 for $142

 Medical collection 09/05 for $600

Collection for $355 that I have disputed and trying to clear up.  First reported 11/06

Collection for $792 with collection agency.Original creditor shows as paid.Trying to clear up. First reported 02/05

CC opened 06/07 closed by credit grantor, paid off 08/09 never late

CC paid after charge off paid 02/07

I have been told that if I pay off the collections now that my score will go down.  Is this true?

The house we want is approx $75K so the total loan will be about $95K.  Would we stand a chance with FHA?  Also, where do we even start to get an idea if we could qualify and for how much? Thanks.

Message Edited by rodeogal on 08-12-2009 04:04 AM

Message Edited by rodeogal on 08-12-2009 04:08 AM

Message Edited by rodeogal on 08-12-2009 04:15 AM

[DallasLoanGuy]

see if the modular company has financing.

?

[Anonymous]

So are you saying that we don't stand a chance?  I thought we could do a home/land loan.

[ShanetheMortgageMan]

Why are you making so much more income this year than you have made in the past?

Is the income all salary? 

How long have you been paying on your past due federal taxes?

Is the land payment for the land that you would be building on?  Or is that separate?

What will the status be of the home that you have the mortgage on?

It is true that if you pay an old collection, it'll show a $0 balance, but it will also more than likely update the date of last activity to when the collection account was paid.  So your medical collections from 2005 will look like they just happened.  FICO scores are sentisive to the dates on negative accounts, so by paying it off you will have updated the date on the account, and reall hurt your FICO scores.  Medical collections aren't really counted against you when qualifying for a mortgage, sure they aren't helping your scores, but an underwriter isn't going to deny your loan just for medical collections.  If you were going to pay anything off, it's always my suggestion to offer a pay-for-delete (PFD).

FHA loans can purchase the land & modular/manufactured home all at the same time, however the purchase contract for the home must not include the price for the land unless the home builder also owns the land.  If you are buying the home and land from two separate places, you'll need a separate contract for each. 

[Anonymous]

Thank you for the reply.  Our increase in income is all salary and due to a better job.  I have been there almost 2 years and husband has been at his job for 5 years. 

We have been paying on our Federal taxes for 14 months and have about that many more to go.

Yes, we will be putting our house on the land we are making the payment on.  The person we are buying from owns the land and is used to working with lenders in these cases.

We will putting our current house up for sale shortly.

I have read many more threads about collections and I think I will wait until we are told to pay them off before doing anything.  Thank you again for your help.

[ShanetheMortgageMan]

Since the increase in pay is due to a higher salary, as long as you have a paycheck at the new amount you should be OK to use the new salary to qualify, rather than an average of past earnings.

For your IRS taxes the payment will be included in the debt to income ratio, a payment history will be needed showing all payments were made on time (IRS has a standard form they can send), and also a copy of the payment agreement terms (this probably was in the very first letter you rec'd from the IRS after the payment plan was established).  If all of that is not available then odds are it'll have to be paid in full prior to closing.  It also is very important to make sure your loan officer notes the file that these have not been turned into a tax lien, as if so then additional documentation is needed in order to not have it paid off.

It sounds like the land is on a contract for deed or something along those lines?  If so then the value of the land that the lender will consider will be the lower of the the appraisal (which will break down the value of the land & the value of the home) or the contract for deed price.  For "cash to close" calculations that is important, as if the contract for deed price is more than the appraised value, you will be short financing by that amount.  For example if the land price was $35k, the value via the appraisal is $30k, and you are buying the home for $80k - you will owe a total of $115k between your down payment and the new mortgage amount... however the lender will only lend on the $110k value.  Assuming you are going with FHA financing, that would be 3.5% down on the $110k value + the difference in $110k & $115k.  Still following this example, if you only owed $30k on the land, and not still the full $35k, then the $5k of equity you have could be applied towards the difference in the $110k value & the $115k sales price... resulting in just a 3.5% down payment on the $110k value.  Little complicated but hope you were able to follow.

[Anonymous]

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@Anonymous wrote:

I have read many more threads about collections and I think I will wait until we are told to pay them off before doing anything.  Thank you again for your help.

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When it's time to handle the medical collections check out the HIPAA process.  Paid medical collections have to be removed due to privacy concerns.  That will help your score..