topic Minimum scores for FHA loan?....and collection question in Mortgage Loans

Minimum scores for FHA loan?....and collection question

Anonymous — Tue, 05 Feb 2013 20:36:35 GMT

My scores are equifax-629, transunion-648, experian-588 Been told you need a mid score of 640. Is this true?

My scores were higher 6 months ago. Did a deal with the collection agency to pay half the amount. Two months after I paid my scores went down. Two credit reports show past due balances on a payment plus the other half that's due. ugh!! This made no sense to me since I have a letter stating the account was settled for a agreed amount. Can understand the balance but not the past due balances of $51 on one credit report and $359 on the other. Disputed with all three credit reports and they will not change it. Should I just pay it off? I'm afraid if I pay it off it will put it back on the radar and lower my scores even more. I know that sounds stupid however never thought paying a settled amount would lower it either. Hope all this makes sense.

Re: Minimum scores for FHA loan?....and collection question

Anonymous — Tue, 05 Feb 2013 20:39:14 GMT

There are a handful of lenders still accepting 580 mid score.

A bigger handful accepting 620 mid score.

Re: Minimum scores for FHA loan?....and collection question

Anonymous — Tue, 05 Feb 2013 20:47:08 GMT

Thank you for answering my question on credit scores for FHA loans. Very much appreciated.

Any advice on the collections issue?

Re: Minimum scores for FHA loan?....and collection question

Anonymous — Tue, 05 Feb 2013 21:48:22 GMT

Do you have a payment plan in writing?

Generally it is best to apply for mortgage before paying any collections, charge offs, etc etc. reason being they may not have to be paid. Even if they did have to be paid you can still make a settlement and pay them according to UW.

If the collection is older you shouldnt have a problem. Just be ready to jump through a few hoops when you get conditions. The process will be based on UW discretion. Your LO or Broker should have an idea from past experience.

Re: Minimum scores for FHA loan?....and collection question

DallasLoanGuy — Tue, 05 Feb 2013 23:05:32 GMT

they settled for less than the balance owed?

then they should report a zero balance.

if you have documentation, then you can get that updated.

few lenders at 580 and 600 but the debt ratios are tight and hard to get these done.

620+ a wee bit easier to get but debt ratios still tight

640+ is the sweet spot.

you might be able to get your scores up with past due balances going away.

you should have a lender do a score simulation before doing anything though.

Re: Minimum scores for FHA loan?....and collection question

Anonymous — Wed, 06 Feb 2013 00:27:22 GMT

The collections may be a problem if you are going to try to qualify for 620 or 580. The UW rules are stricter with lower scores and once the new FHA guidelines take effect in June, the LO or Broker will have to put your file through manual review and explain why they believe you should get the loan. This new process may deter lenders from giving loans to those with lower score qualifications. These new rules are tough and may lock some really good candidate out from a loan.

Re: Minimum scores for FHA loan?....and collection question

Anonymous — Wed, 06 Feb 2013 00:52:18 GMT

Good Point Moving

Once the New FHA rules come out it would be much more beneficial to just apply Conventional.

You may have to save a little more for the down payment if you cant get any assistance, but overall you can get a Conventional Loan with a 620 score and jump through the same hoops as FHA once there changes take effect. Even with a little higher rate from Conventional Loan with lower score would still be cheaper in the long run over FHA.

Re: Minimum scores for FHA loan?....and collection question

Anonymous — Wed, 06 Feb 2013 15:16:00 GMT

Wanted to thank everyone for responding. This has been my one and only collections and it's been a total nightmare.

Letter from the CO says it's settled with total amount due: $0 Below is the letter.

"This letter shall serve as confirmation that the above-mentioned account(s) are considered settled as of this date, per the amount placed for collection by the above-named creditor. These accounts(s) were settled on 4/27/12 with a final payment of $ 226.73 which is less than the full balance. Confirmation of this settled status has been approved by the creditor listed above. Please note that the current balance was calculated on 8/17/12 and my vary due to payments and/or accrual of interest after that date."

Sent this letter to all three credit bureaus and was denied anything changing on my credit report. Even the past due monthly balances. It's been very frustrating. Almost wish I didn't pay it because after I paid half the balance that's when my credit scores plummeted and monthly balances showed up. Grrrr!!!!

Re: Minimum scores for FHA loan?....and collection question

jadeite788 — Wed, 06 Feb 2013 17:19:10 GMT

That deal with the collection agency was a bad deal, you should always do a PFD letter first. Once they agree then you pay that sucker off in full. If its within SOL, i would not be surprised if the collection re-aged. What you did was pay half and then another half later. That ended with the collection agency to report an update on the account. Which messed up your scores.

Re: Minimum scores for FHA loan?....and collection question

jadeite788 — Wed, 06 Feb 2013 17:23:27 GMT

@Anonymous wrote:
Wanted to thank everyone for responding. This has been my one and only collections and it's been a total nightmare.

Letter from the CO says it's settled with total amount due: $0 Below is the letter.

"This letter shall serve as confirmation that the above-mentioned account(s) are considered settled as of this date, per the amount placed for collection by the above-named creditor. These accounts(s) were settled on 4/27/12 with a final payment of $ 226.73 which is less than the full balance. Confirmation of this settled status has been approved by the creditor listed above. Please note that the current balance was calculated on 8/17/12 and my vary due to payments and/or accrual of interest after that date."

Sent this letter to all three credit bureaus and was denied anything changing on my credit report. Even the past due monthly balances. It's been very frustrating. Almost wish I didn't pay it because after I paid half the balance that's when my credit scores plummeted and monthly balances showed up. Grrrr!!!!

Yup, should have done a PFD letter first, then once they agree then send the payment. Otherwise they are not going to take it off because you agreed to their terms. You could do a GW. But I don't know if that will work. this should be in the rebuilding credit forum for more help.