trying to get pre-approved but.....experts please!

buyhouse36 · ‎10-26-2009

Our scores are fine...but for the amount of loan we are asking, the LO said we have to pay off 20-30% of our payments or about $300-$400 a month. We are currently at 66% debt/income ration. We need to be at 41% or lower. Our credit accounts that are still open have small balances...so paying them off wont equal anywhere near $300-400 worth of payments. The LO recommended paying off 1 or 2 of our larger payment accounts that are closed. The problem is these are accounts we planned on "SETTLING" after we bought. We have aggressive payment plans with them in exchange for 0% or low interest rates. On these accounts we are paying 3-4 times the minimum to pay them down faster and in exchange for very low interest. I know that settling negatively impacts your credit. So we were going to do this after closing. We are being gifted the majority of the amount to settle these by family. When I advised the LO that I didnt want to SETTLE these now, she said "I have already pulled your credit. We will not pull again. So she doesnt care what terms we have, as long as she receives docs that say Paid...it doesnt matter". Is this true?? If we can safely settle these now, how should we proceed with the creditors to have the best result?? Would PFD work here?? How do you do this??

Help!!!

llecs · ‎10-26-2009

Are these debts with the original creditor (OC) or is a collection agency (CA) reporting? If OCs are reporting these, what kind of debts are they? CCs? Utilities? If these are CC debts, what are the CLs reporting w/ balances of each and are any of them charged-off, or were they closed by you?

Most lenders may require you to pay most, if not all of your debts, especially if they were ever sent to collections or CO'd. Good news is that there are other lenders out there that could work with you.

buyhouse36 · ‎10-26-2009

Thanks for the reply but...

All accounts are with the original creditor or credit card companies. All are in good standing. None of them are charged off. Most were closed by me. My lender is not making me pay all of them off but get my payments down another 20-30%. In other words, right now, we pay about $900 monthly towards debt. She needs these down to $500-600 monthly. It seems I can provide settlement amount letters to my lender and then bring these funds to closing. Is that right???

llecs · ‎10-26-2009

I don't know the answer on bringing funds to closing...bumping for others.

Gotcha on the status....first off...do NOT settle, and I know you know that settling is bad for your score. PIF with each of these. If you settle, and if they even accept a settlement, the CCC will mark "settled" or "paid for less than full", and per FICO scoring, that is just as bad as a charge-off or new collection. It will really bring down your scores. A PFD arrangement will get a deletion, but no CCC would settle when they know they can get 100%. And if any of these accounts are older than your avg. age (AAoA), then your score can drop if deleted. Plus, you could take a hit if your mix of credit is impacted.

If I was in the situation, I would make sure that I had at least 2 revolving and one charge card open. I would then PIF all closed cards and pay the open cards to under 9%, or at least do my best to get to that point.