topic Re: Mortgage before or Mortgage after Bk falls off? in Mortgage Loans

Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 00:24:27 GMT

Looking to apply for a mortgage this year. I had intended on applying after my chapter 7 falls off in a few more months but I have heard conflicting reports about whether or not my score would even go up after deletion. While I have rebuilt some credit I have 5 collection accounts(3 Midland) that I settled within the past year. All that is left on report from a balance standpoint is student loans that are being paid as agreed. So my DTI is one of the few things working in my favor. I have a few low limit cc's that I applied for in the past year and keep less than 15% on those.

I am hesitant to apply for anymore so i dont have too many inquiries. My question is should I wait until the bk falls off completely before applying and is there anything else I can do in the meantime to raise my score? My fico is currently 668 and I'm hesitant to do anything else that could potentially lower my score. I would appreciate some insight since I am unsure what to do from here.

Re: Mortgage before or Mortgage after Bk falls off?

tooleman694 — Thu, 28 Feb 2013 00:39:36 GMT

I would go ahead and apply now. When my BK fell off my report last year my score dropped 10 points.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 01:10:30 GMT

Eewwww don't tell me that tooleman...you're breaking my spirits. :-( LOL

Re: Mortgage before or Mortgage after Bk falls off?

DallasLoanGuy — Thu, 28 Feb 2013 04:53:21 GMT

you have 5 collections post bk

that is bad

i would wait unless i had a VERYYYYYYYYYYY good explanation for the new collections after a bk

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 11:30:10 GMT

I would wait.

Derog credit post BK is not looked upon favorably.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 11:54:12 GMT

That is what I was thinking too. I also have a Chapter 7 that is due to fall off my reports in Aug 2013. I have one unpaid collection from 2009 and I closed on an FHA loan on 2/6/13 with a mid fico of 703. My LO told me if I had any lates, I would not be approved. The one unpaid collection didn't have to be paid because my score was higher. My lender required a mid score of 660.

After BK, you are supposed to be a model citizen as best as you possibility can. Unless you have a great letter of explanation that you can write to the UW stating that those collections were out of your control, I don't think your file will go over well with a BK, borderline credit score, and 5 collections in the past 2 years. I would wait until the BK falls off and try then as someone who never filed. There is a chance, they will look it up in public records...just be aware of that. But in your case, you have a much better chance getting approved after the BK is removed.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 12:57:12 GMT

I should add that 4 of the accounts of those collections are 5-6 years old and one that is 2 years old. Again, all of those paid to zero balance. I realize that no collection or late payment etc. is ever looked upon as favorable in the eyes of a lender. I also realize that waiting until everything falls off the report, keeping revolving to a minimum, and establishing new credit over time is the best possible choice as far as getting a favorable mortgage. I do know that people get approval for scores that are less than mine. I guess for now I can give it a try and see what kind of rate they'd be willing to extend - yes, I could get dinged for an inquiry but if I end up waiting anyways it won't really matter.

I have noticed interest rates on the rise of late and expect they will continue to do so. It is quite possible I could wait a few years then home prices recover, rates go up, my score goes up but still it really wasn't worth the wait. I've rented for nearly 15 years now and I just look back at all the money wasted. Even a bad home loan(high interest) is better than renting IMO. Even if I am paying tons in interest, some of the money is still going toward something. There is also a chance I could restructure the loan at a later point in time once my credit has fully recovered.

Re: Mortgage before or Mortgage after Bk falls off?

tooleman694 — Thu, 28 Feb 2013 13:25:39 GMT

When I went into UW I still had the BK on my reports, and I have lates from 2009 when my student loan went default. Plus a collection.

It has fallen off since then. Maybe thats why they didnt ask about it.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 13:27:01 GMT

The problem is you incurred all of those collections AFTER bankruptcy. Yes scores are approved that are lower than yours everyday but most times the applicant did not have a BK on their reports or if they did, they didn't have derogatory information after the BK. Derogatory info after BK looks very bad to lenders. That is the problem. Like I said, my LO said if I had even one late payment, I would have been denied. They may let one small screw up pass but multiple screw ups shows the lender that the person still hasn't learned how to manage credit post BK.

Lenders also like to see multiple positive trade lines after BK to evaluate how much that person has learned about managing credit post BK. No positive trade lines post BK can be equally as bad as having multiple collections post BK. How many positive trade lines do you have and how old are they?

The paid collections (especially) the most recent one I would try to GW.

You can most certainly fill out the application and give it a try, just don't be surprised if it comes back denied. It isn't all about a qualifying credit score. Lenders look at many other things to determine if someone is a good candidate for a mortgage or not. If your scores were in the 700's, you would have more leverage with the lender. You may get approved with conditions that aren't easy to satisfy. Like the lender may require 3 months of reserves and several collections removed from your reports like we are telling you to do before hand. Having a conditional approval with conditions that cannot be satisfied before the preapproval expires, is basically a denial as you would have to reapply after you satisfied the condition. Preapprovals are only good for 90-120 days and it is likely to come back with conditions that cannot be satisfied before the preapproval expires. If you wait for the BK to fall off, your conditions will be easier to satisfy. To me, an approval with conditions that are impossible to satisfy before your preapproval expires, is a denial dressed up in nice clothes.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 13:39:03 GMT

I should also emphasize that your interest rate will probably be about the same as someone with a 700 score going FHA. Your score impacts your interest rate more so if you go conventional and to go conventional, you will need at least a 680. You will most likely get a good interest rate going FHA, but with conditions that are impossible to satisfy in the timeframe allotted. You can also look into NACA, which doesn't qualify you based on score but it takes 6-24 months for approval as they have 14 pages of requirements you must meet for approval excluding a credit score requirement.

Re: Mortgage before or Mortgage after Bk falls off?

tooleman694 — Thu, 28 Feb 2013 13:43:37 GMT

Makes me wonder if this was part of the reason I was denied last summer.

I filed BK in 2002 and it finally fell off last fall. Now that my file is back in UW I no longer have it reporting.

My scores did drop when it fell off, but since has recovered and im back at the same levels.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 14:12:12 GMT

I currently have 21 tradelines on my report ranging from '05 to the newest one of Dec. '12. Of those 21 accounts 14 have a paid as agreed status. 5 accounts have a status of 120+ days past due and 2 are showing as bad debt/collection. The 7 negatives all have zero balance. The reason there are more than what I previously stated is because of the accounts being transferred or sold.

I have heard that Midland basically laughs at a GW attempt so I have not tried that. I have considered trying it with everything else though.

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 14:26:02 GMT

Like I said, if you aren't worried about the inquiry and a ding to your score, you can try for a preapproval. I recommend that you find a lender that does Desktop Underwriting as they actually put all of your information in the system such as W2's, paystubs, etc. and the LO often will give you a heads up as to what conditions the UW will most likely want satisfied. Banks like Wells Fargo don't do this until you are in underwriting which means you can get far down into the process before you know if you are approved or not. If things don't go through, look into NACA if you don't want to wait to get your report cleaned up. But keep in mind, a NACA loan typically takes 6 months for an approval and sometimes longer. If you do decide to apply for FHA, let us know how it goes. I recommend speaking to a Broker instead of a LO through a bank given your credit situation as they can find a lender that has requirements best tailored to your situation. Good luck! :-)

Re: Mortgage before or Mortgage after Bk falls off?

Anonymous — Thu, 28 Feb 2013 21:32:39 GMT

I am currently working with a LO that told me I first needed to work on getting into some sort of payment agreement with the outstanding Midland accounts. He said because they were accounts in dispute with a balance showing I would not be able to get approved. I'm guessing next thing he is going to tell me is that I need to get the account in dispute notation taken off those even though they are now showing a zero balance. I believe he is thinking he can get me into an FHA loan. I will definitely keep in mind what you said about completing the requirements and make sure whatever those are I have a more than fair chance of resolving. i will also ask about the underwriting process and see if he knows anything about desktop underwriting.

As far as my current progress on my credit repair attempts, I recently spoke with one of my collection creditors and they told me that will never delete an account unless there is a dispute and they feel it was an error on their part. Apparently I need to change my approach. Instead of being candid and admitting to my mistake and trying to get a GW drop I need to dispute it and try my best to make it look like it was their fault. I had a little more success with another creditor and I feel that I am close to getting them to remove from the bureaus.

I haven't even tried anything with Midland since my initial dispute. I realize that if I try and dispute again this will make it harder and longer in the underwriting process. Decisions, decisons...Do I keep trying to clean up my report now or leave everything alone and try to get approved? I haven't completely given up hope that I can get some more things dropped from my report.

I 'm not familiar with the NACA loan so I will have to research that as well. I guess I will just have to wait and see what he says and see what makes sense. I'm looknig to finance a max of 150k.