topic Re: Lenders that approve USDA with collections?! in Mortgage Loans

Lenders that approve USDA with collections?!

Anonymous — Wed, 18 Jul 2012 23:19:35 GMT

I am in escrow on a house and was supposed to close on 8/17/12 but now I got back conditions that require me to pay off a collection ($2200) that USDA says they don't require me to, but apparently a lot of banks have overlays that do. If anyone has a lender or knows of one that will approve a $110,000 house with a monthly gross income of $3500 and credit scores of 686, 692, 700 in the state of Arizona (house is located in Buckeye) please message me or respond here with help info if the forum mods allow it.

Thank you for any and all help you can provide!!

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 01:45:00 GMT

@Anonymous wrote:
I am in escrow on a house and was supposed to close on 8/17/12 but now I got back conditions that require me to pay off a collection ($2200) that USDA says they don't require me to, but apparently a lot of banks have overlays that do. If anyone has a lender or knows of one that will approve a $110,000 house with a monthly gross income of $3500 and credit scores of 686, 692, 700 in the state of Arizona (house is located in Buckeye) please message me or respond here with help info if the forum mods allow it.

Thank you for any and all help you can provide!!

You didn't mention which lender wants you to pay off the collection. It would help others to know in advance also.

As far as what lender that is USDA approved that will approve you with-out paying off the collection would be something your LO or Broker should be able to let you know and if using a Broker they should already be moving your file to a new lender for approval unless they have no other lenders they work with for USDA loans.

EDITED: Maybe you should switch and go FHA if you keep running into the problem. Just a thought.

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 02:09:01 GMT

I applied with Mohave State Bank.

Can't go FHA because I don't have $3850 for the down payment. I've got $2200 saved to my name and was hoping to have some of that as a cushion, and some to go towards furnishing the house. It needs a fridge and w/d.

I only applied for a mortgage because http://www.rurdev.usda.gov/SupportDocuments/CA-SFH-GRHUnderwritingGuide.pdf USDA loans weren't supposed to require collections to be paid off.

I also contacted Homeowners Financial Group USA, LLC and the broker contacted his UW and it came back saying that it looked like his lenders would require it to be paid as well.

Adobe Financial Corp rings to a new mortgage broker and he said both his lenders required anything over $500 to be paid off.

I was going off the list the AZ USDA Contact gave me for approved lenders in AZ for the USDA GRH loan.

I've already paid $22 for the credit report, $275 for the home inspection, $45 for the pest inspection, plus $75 for car rentals/gas to fly to AZ to look at homes. (I live in LA)

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 02:19:59 GMT

A lot of people on here that have gone USDA are using Wells Fargo as the lender. Not sure what there requirements will be but may be worth looking into.

Here is another thought; Ask the LO and or Broker if you made a payment arrangement with the collection if that would be okay. You may have to make a payment to it but may be the way that gets you into your home. Just make sure that what you agree to with a payment that you do pay it.

Hopefully others will chime in with their opinions.......

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 10:27:13 GMT

I will ask about payments, but from my understanding, you would have to pay off te entire balance.

Every broker and even my realtor said avoid Wells Fargo like the black plague. Basically, they are the black hole of home mortgages. I've yet to hear something good about them, and I had considered them from the beginning because they kept coming up here on the boards.

For whatever reason, they weren't on the list of Arizona approved lenders, but are on the national list.

I'm about to draft a letter to Fidelity to see if they'll accept a 50% payoff of the original debt owed at this point.

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 18:43:35 GMT

I do not know of a single bank that will write a loan (conventional, FHA, or USDA) that will make an exception for any collection greater than $1000. Sounds like you need to work on your credit a little bit before buying a house. As soon as these collectors see you have assets (a house) they will get a judgement and lien against you and that will mess up your credit even more for 7 more years.

The answer to your question is you do not WANT to buy a house with collections....not which lender will loan to you with collections. Not judging you at all..,.just sharing what I know. Good luck!

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 21:25:18 GMT

I've been working on my credit since February after finding these forums and was able to buy a car in April with a super low interest rate because of what i learned. I had 1 collection PFD, another one come off, and at least 2 other negatives disappear. This collection is the ONLY one left. It is 6 years old and WAAYYY past SOL. They can't come after me for anything. It falls off next August.

My issue is, I asked the lender about this collection before I applied and all she said was the dispute needed to be removed, which I had done. I hadn't paid it, cause I don't owe them all this money they are asking for and they REFUSE to respond to certified letters I have sent in Feb and May requesting a PFD and Debt Validation. But when I didspute with CRA's they confirm. I called them yesterday and they were playing games on the phone acting like they didn't have my current address when I asked why they hadn't responded to my debt validation letter reading off all my previous addressed that they got when they pulled my credit report back in May. Then gave me that BS "well if you don't want to give us your address..." and I had to come back at them "you know you got it, it was on the envelope and the letter you claimed you received". Of course, she later 'just found it' and said they mailed the letter four days after they got my certified letter and they can't speak for USPS possible mistakes. 'Yeah right!!"

Had the lender said it needed to be paid BEFORE I put money into buying a house and didn't say I was pre-qualified and pre-approved, I wouldn't have applied. So it's funny to me that when I call 2 brokers, they check with their UW FIRST to see what they say. Why she couldn't do that, is beyond me.

Anyway, if i don't get the house, I'll just move back home for a year and save so that next Sep when this falls off my credit report and I have PERFECT credit and over $9000 saved I can go FHA instead and look for a house with no location restrictions. I just hope interest rates don't go up much further. Or price of homes.

The games CO play should be illegal, and both the brokers I spoke two agreed and said legislation needs to change. It's all a scam orchestrated by the CRA's and the CO and CA to keep people's credit scores low so they can pay more in interest. It's a win-win for the financial industry.

But with a 700 credit score and a pre-approval, anyone would think they are good to go to purchase a house.

Re: Lenders that approve USDA with collections?!

Anonymous — Thu, 19 Jul 2012 22:05:28 GMT

I do understand your frustration. I've got a couple similar things that are driving me absolutely crazy that just don't seem "fair"

I had to pay off a $5k collection that was 6 years old and way past the SOL and that was for a conventional loan! I'm still not clear to close and out fo the woods yet. I do hope you find what you're looking for but I will say each lender is different. I have a 705 FICO and 25% down payment and they're still giving me grief...so i know your frustration!!

But back to your question I do not know any lender that will loan with a collection more than $1000.

Re: Lenders that approve USDA with collections?!

Anonymous — Fri, 20 Jul 2012 06:05:57 GMT

Thank you imandy. But I only applied because I read on these boards that there are people getting approved for USDA loans with scores higher than 640 that had collections over $1000. That's why I decided to do USDA. Had I known I would have had to pay it off, I never would have a applied for a mortgage or I would have planned to pay it off then go FHA so I can look for houses in a more central location.

It seems silly for USDA and FHA to allow collections over $1000, but no lender will approve the loan.

Re: Lenders that approve USDA with collections?!

Booner72 — Sat, 21 Jul 2012 14:07:19 GMT

I agree that it needs to be gone or you will need to pay or see if the UW will allow a settlement, I'd be sure and find that out before I paid the thousand bucks or whatever it works out to be. I read that FHA allows payment plans on collections over 1k, but I'm not sure what USDA does.

If you don't have any cushion for a back up, maybe your best bet IS to wait until it falls and save up and go USDA. Things happen for a reason and maybe it's just not time yet - only you know that. I know for me, it was time, and I paid off EVERYTHING, gladly, so it would happen, and I had to pay off almost 4K worth of a judgment and cc balances, etc. I thought interest rates would never get lower last year and I have 4.5 interest rate, and look where they are now! Though the housing market in my area is coming back (Oregon) and a guy at work had his house he bought 10 mo ago on the market TWO DAYS and it sold last week.

I think people that lost houses are getting past their 3 year mark, people are starting to see that WOW, I better get it now, and there just arent that many houses out there that investors haven't already swooped up and taken - though of course, that depends on your area. Something to keep in mind if you wait it out.

Good Luck on whatever you decide to do.

Re: Lenders that approve USDA with collections?!

luvsandyshores — Sun, 22 Jul 2012 01:56:48 GMT

If the debt is out of the SOL, have you tried to settle with them for less? Send them something in writing offering whatever it's worth to you to get this off your report. There should be a sample letter on here somewhere. You can say that you know you don't owe the amount they are asking you for, but you're tired of arguing and at this point you're willing to give them $xxx if they will consider it paid in full. Let them know that if they won't accept less, you're resigned to spending a few more months arguing about it with them, until it falls off your credit report.

If they know they can't sue you, and soon it won't be on your credit report anymore, they should be happy with whatever they can get out of you. Of course, there is always the chance they'll be stubborn ^$#@%*'s.

Good luck.

Re: Lenders that approve USDA with collections?!

Anonymous — Sun, 22 Jul 2012 18:23:59 GMT

Sherakay,

Are you able to go USDA Direct? My scores were all over 660 (the magic number to overlook problems on credit report) and I had two collections reporting. They were not required to be paid and nothing was ever said about them. USDA Direct works differently than USDA Guaranteed.

Re: Lenders that approve USDA with collections?!

Anonymous — Mon, 11 Feb 2013 00:54:26 GMT

I made too much for Direct. I ended up not getting the house and am now paying off my remaining two CC and will save and pay down my car and student loans while waiting for the collection to fall off after September.

Re: Lenders that approve USDA with collections?!

Anonymous — Mon, 11 Feb 2013 01:14:52 GMT

I disagree. I just closed on a FHA loan on 2/6/13 and I have a unpaid collection on my credit report from 2007 in the amount of $1100 that I was not required to pay and did not pay. I got approved first through a mainstream broker who also told me my collection did not have to be paid. I had to switch to the builder's lender to get $15K in incentives. The builder's lender is UAMC and they required a 660, the Broker only required a 640.

I didn't have the downpayment for FHA either but I found a program through my local housing that allowed 3% downpayment and closing costs to be rolled into a second mortgage (the builder paid my closing costs in full which were $8,000 so I didn't need to roll that into the second mortgage...just the downpayment). My cash due at closing was $138. And I paid $425 for an inspection and $2,000 in earnest money. The earnest money covered the remaining 0.5% down required by FHA. So I recommend checking with your local housing authority for programs that you may qualify for that may enable you to do an FHA loan.