topic Re: Mortgage with bad credit but debts past sol in Mortgage Loans

Mortgage with bad credit but debts past sol

Anonymous — Tue, 25 Mar 2014 17:35:53 GMT

Ok so my situation is a little tricky. Fiance has been paying on his land contract for the past 3 years and has been completely current and will have it paid off next year. We want to buy a house now taht we have found but his credit score middle is 511. After doing research here and other sites, I found that most of his debt is past the SOL and will fall off in the next two years. The rest of his debt is medical which I might be able to dispute through the HIPAA laws violations which I have read about on here. Now with his score so low, we cannot find a lender to give us the loan based on his score alone. Does anyone know of a lender who will be willing to work with us since he technially can't be sued for any of this debt anymore legally? His debts are basically over with but stuck there. We need to find a lender to help us get a $60,000 loan which isn't much really and we have the income to suffice the payment. We just need help here!

Re: Mortgage with bad credit but debts past sol

ShanetheMortgageMan — Tue, 25 Mar 2014 17:42:47 GMT

Only a handful of lenders will do mortgages for that credit score (511), and they don't loan in every state, so that is probably why you are having such a hard time finding one. Those who do would require a 10% down payment. There are bound to be some local hard/private money lenders that would entertain with a 30-40% down payment as well.

Have you re-established your credit for at least 12 months? What open & active trade lines do you currently have going on and how long have each of them been opened for?

Do you have any credit cards and if so, what are their balances & credit limits?

Personally I don't recommend people fall in love with buying a home until they are either pre-approved or have the cash to purchase it, it usually just ends in heartbreak.

Re: Mortgage with bad credit but debts past sol

Anonymous — Tue, 25 Mar 2014 17:47:47 GMT

Well we thought the family was going to purchase the home for us and do a land contract with us but they don't want to spend that significant amount of money which I understand. They have offered to do our down payment for us up to 20% though. There isn't really anything helping the score at this moment. He has been afraid to take out any more credit cards due to these issues and also afraid that a new credit line might make the score worse. We can prove though that he has been paying off the debt of the current land contract though but of course it isn't reported.

Re: Mortgage with bad credit but debts past sol

ShanetheMortgageMan — Tue, 25 Mar 2014 17:58:28 GMT

That 20% could get your foot in the door. Sorry missed the part where you said land contract. Is there a balloon payment on the land contract, or if not, then why the need to get financing right now? If the land contract is recorded then you could actually treat it as a refinance instead of purchase... the payoff would be what is owed on the land contract & the current value of the home would be used.

The best way to improve his scores is by having open credit reporting on time payments each month. It'll take a long time to get his scores up otherwise, and eventually he may not even have credit scores (I've seen plenty of credit reports that only have negative items, then after they get a couple years old with nothing new there just isn't enough credit history to generate a score). It is daunting to get new credit when you've had past credit issues, but it's the best (and probably only) way to get back on track to having great credit again. At a 511 credit score there isn't a whole lot that could make his scores worse (public records and having new delinquent credit marks), you probably have heard that taking out new credit dings the scores a little and that is true but it's mainly for people who already have at least fair/average credit scores. He may lose 1-2 points initially, but he'll gain 3-5 points each month afterwards. Ideally if he could get 3 or 4 credit cards it could be possible for him to have scores in the 600's by the end of the year. There is tons of great info at Rebuilding Your Credit and the crowd there is very helpful.

Re: Mortgage with bad credit but debts past sol

Anonymous — Tue, 25 Mar 2014 18:05:59 GMT

There is a balloon payment at the end but we are going to pay it off with our taxes next year. The house was purchased for him and his son before I came in the picture with my child and then we got custody of his other son. So a house bought for 2 became 5 within two years. So the house is simply too small for our new family. We only owe like $7,000 or so on the house and plan to use it as a rental when we move. I've been in the rental housing industry for a few years myself now so I understand how they work. Do you guys know of any credit card companies that would give him one or a few small ones with his terrible score? We know we need to get them and have them established. Just afraid to add more dings to the report. We have a good family who is willing to help pay for the deposit and reserves if we need it. They just don't want to buy us a house and give us that much money. Just need some help getting his score up quickly.

Re: Mortgage with bad credit but debts past sol

Anonymous — Tue, 25 Mar 2014 18:07:54 GMT

Oh I should also mention that his dad is currently Active Duty with the Air Force and has been for the past 25 years and will retire next year. I don't know for sure if he would qualify for a VA loan since a direct family member is still active duty?

Re: Mortgage with bad credit but debts past sol

ShanetheMortgageMan — Tue, 25 Mar 2014 18:13:27 GMT

Only a veteran (or their widow) can obtain a VA loan. That option won't work unless his dad is going to purchase the home & get the VA mortgage, and also live in the home with you guys.

There isn't any quick fix for his scores, no magic. The quickest way will be to get the negatives off and establish new positive credit. The sections you'd want to go to for credit card applying advice are Credit Cards & Credit Card App Approvals

Re: Mortgage with bad credit but debts past sol

Anonymous — Tue, 25 Mar 2014 18:14:50 GMT

So you dont know of anyone who would able to get us a loan with his scores and current credit situation with him not being able to be sued by any of the debt since they fall out of the SOL?

Re: Mortgage with bad credit but debts past sol

ShanetheMortgageMan — Tue, 25 Mar 2014 18:21:16 GMT

Not if he doesn't have any re-established credit. Traditional mortgage lenders need to know you can manage credit after a series of delinquencies. Even back in 2006 when sub-prime lending grew on trees, they still required you meet minimum trade line requirements by having open & active credit. You could try local hard/private money lenders in your area, that'd be about your only shot.

Re: Mortgage with bad credit but debts past sol

babyeyes00 — Thu, 27 Mar 2014 15:01:26 GMT

Shane, you rock. I wish there were more LOs like you. Where were you when I was applying?

Re: Mortgage with bad credit but debts past sol

ShanetheMortgageMan — Sat, 05 Apr 2014 18:41:42 GMT

@babyeyes00 wrote:
Shane, you rock. I wish there were more LOs like you. Where were you when I was applying?

*Shrug*. Here?