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low credit hopefully bouncing back

low credit hopefully bouncing back

Hello. I'm hoping to gain some insight into my situation.  8 years ago my credit was excellent, high 700s fico score with reasonable revolving credit. Made the deciision to go to medical school full time and lived  on student loans. 4 years of medical  school, maxed out on some credit cards and fell behind payments (bad decisions...), did 4 years of specialty training, earning a nominal stipend, enough tomake ends meet. credit cards went into collection, settled about 20k of debt, . now i'm a full fledged physician earning a good salary, have been on time with my student loan payments for almost a year now, and have been putting aside a good amount for a downpayment on a home.  debt to income ratio is 16%. 

 

my question is: with settled debt on my record for 1 of 7 years, good payment history on my current good standing loans, are my chances for approval for a 300k home loan ( with 100k downpayment) slim? i understand that i've made bad decisions in the past, but does my good income, and low DTI ratio, and good payments history thus far make up for anything in the eyes of a mortgage lender? any insights, be it negative and of course positive is greatly appreciated. 

 

Thanks!

 

 

Message 1 of 6
5 REPLIES
Valued Contributor

Re: low credit hopefully bouncing back

A LOT of bads will be overlooked when you are putting 100k into the deal

The older stuff shouldnt be an issue unless there are judgments and those will have to be remedie

are you current on all student loans? Those can be a bit sticky -

 

Brian

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Brian B The Loan Professor
Mortgage Banker - offering FHA, VA, USDA , and Conventional mortgages in all 50 states -

If I do not respond to a follow up question please feel free to contact me directly
Message 2 of 6

Re: low credit hopefully bouncing back

So these settled debts, all were sold to collection agencies and some had judgements. That was before my income made a significant jump. Student loans are all up to date and are on automatic drafts toward a 10yr payment plan (med school 6figure  student loan). I am in no hurry to purchase a home at this point, but I figured that rent is money not invested and I would actually like to settle in the current location that I am. 

 

I was also thinking if getting a secured credit card or new car loan would be a nice way to show consistency of loan payments. 

 

On a different note, I also have a hefty disability insurance policy. does this have any positive effect when I'm being looked at credit-wise?

 

 

Message 3 of 6
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Super Contributor

Re: low credit hopefully bouncing back

Unless you have little to no open credit I normally don't recommend people open up new credit within 6 months of applying for a mortgage.  So just depends on how many open trade lines you have now and how long each has been open for, as well as when you plan on applying.  It sounds like you have a student loan or two, so that counts towards open credit.  After the past derogatory items, it's good to have at least 12 months of re-established credit afterwards.

 

If there is cash value in the insurance policy (like whole life) then that can help you qualify, but term life insurance that doesn't have cash value doesn't mean anything to lenders.

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 4 of 6

Re: low credit hopefully bouncing back

I pulled up my 3 bureau credit report and all of them pretty much show my job before medical school as my current employer? How can I have this updated? 

Message 5 of 6
Super Contributor

Re: low credit hopefully bouncing back


rubensmadder wrote:

I pulled up my 3 bureau credit report and all of them pretty much show my job before medical school as my current employer? How can I have this updated? 


That doesn't impact your mortgage application.  Apparently the information is obtained when you've applied for prior credit, so if you haven't applied for recent credit since you've started your current job then they wouldn't have your current employer yet.

 

http://www.experian.com/blogs/ask-experian/2011/03/02/updating-employer-listing-on-report/

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 6 of 6