Can I get a home loan with a charge off on my credit report?

[Anonymous]

My husband and I are looking to buy our first home within the next 6 months. My current credit/financial stats:

CC usage: $4400 of $5300 (paying off $3000  over the next 2 months) current/ on time payments

Collections: 1 medical bill for $75 (currently being disputed, not my debt)

Derogatory: GM Financial Lease  charge off $10,900 (trying to settle for half)

Payment history: 98%

Salary: $53,000 

Average credit age: 3 years 9 months 

Scores: EQ-604 TU-597 EX-614 

So, I’m sure the worst part of my credit is the lease charge off. Will we be able to get a FHA, VA or USDA home loan with this blemish on my credit? There’s no monthly payment listed and it’s not included in my overall debt balance on my report so I don’t think it affects my DTI ratio. 

Any input would be appreciated, thanks.

[sarge12]

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@Anonymous wrote:

My husband and I are looking to buy our first home within the next 6 months. My current credit/financial stats:

CC usage: $4400 of $5300 (paying off $3000  over the next 2 months) current/ on time payments

Collections: 1 medical bill for $75 (currently being disputed, not my debt)

Derogatory: GM Financial Lease  charge off $10,900 (trying to settle for half)

Payment history: 98%

Salary: $53,000 

Average credit age: 3 years 9 months 

Scores: EQ-604 TU-597 EX-614 

So, I’m sure the worst part of my credit is the lease charge off. Will we be able to get a FHA, VA or USDA home loan with this blemish on my credit? There’s no monthly payment listed and it’s not included in my overall debt balance on my report so I don’t think it affects my DTI ratio. 

Any input would be appreciated, thanks.

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It has been some time since I got a mortgage, but let me start by saying that a chargeoff does not keep the creditor from using the legal system to get a judgement against you. The chargeoff is just to get it off their books, and usually these chargeoffs will eventually sell the debt to a collection agency. I know when I got my first home loan my then wife, had a lot of chargeoffs and we had to pay them all off to get the loan. If the debt is still within the SOL, they can and often do sue the debtor to collect the debt. I doubt seriously that the loan would be approved if the debt is still within the SOL. The SOL does vary by State and the clock starts ticking on the DOFD. Also...what fico model is those scores? If they are fico 08 scores, those are not the scores used for mortgage rates...fico 2, fico 4, and fico 5 are, and in most cases they will be lower than fico 08. They really don't use the scores to approve or reject the mortgage, they use the entire 3b reports and look at the whole report. If the loan is approved, they use the middle credit score of the ones I mentioned to set the interest rate. The approval is based on the entire report, DTI, and other factors. If they require a down payment, you will have to supply proof of where the money for the down payment came from, and it can't come from another loan. A mortgage loan is much more involved than any other kind of loan.

[Anonymous]

How long ago was the charge off??  I had some chargeoff's on my report as high as yours but wasn't asked to pay them off for my USDA loan.  However, they were over 6 years old and about to fall off my report.  I believe the chargeoff has to be over 1-2 years old to even apply for a loan.  

Your credit scores are low, which means full manual underwriting.  They'll also want full rent history too.  You'll probably need a good letter of explanation for the charge off.  Like someone was sick, divorce, or they lost their job etc...  

[Anonymous]

Well for VA you have to be a vet. USDA is in rural areas. But i would get those charge offs off along with that dispute. When hubby applied for his va mortgage we fought to get rid of an old late payment & collections. Once we did that when we applied we literally had no conditions to meet before we heard clear to close. Also your dti is very important. We had two cc’s we paid off & almost off. They use your payments on all your debt to calculate how much you can borrow.

[Anonymous]

Yes, the dispute has to be resolved in order to go into underwriting.  I had a collection on my report that was disputed years earlier.  Transunion and Experian both showed the "dispute as resolved but customer disagrees."  Which they said was fine, but Equifax was showing that it was still "under dispute."  So i had to fax equifax all my details to get the dispute removed from my credit report.

[Anonymous]

You can but wait 7 years from the date of the charge off.

USDA loans are great but you are limited on where you can buy a home.

If you have 20 percent down, you're chances are good but you can't have more then a 43 percent debt to income ratio plus, no more late payments or charge offs

[Anonymous]

The charge off is new and will be on my report until 2025!! I tried making payment arrangements but GM Financial’s idea of working with me is asking for $1000/month or one payment of $5900. That means I would have to give them apart of my down payment savings.

[JVille]

Yes exactly and you need to deal with it now and make it go away. Sorry but this will haunt you until hell freezes over or 2025 which ever comes first. You need to pay it

[Anonymous]

From everything I know, a lender will force you to pay it off before they allow you to close anyway.  GM is offering you 5,000 less then what you owe and I can't understand why you seem to be upset about it.  Pay it off and move on.

[Anonymous]

I would pay it off with your down payment savings.  Then you can try to get a USDA loan with $0 down and live in the suburbs.  You just need money for closing costs, which you can pull from your retirement.  For a $200k house, closing costs will probably be around $12k depending on taxes in your area.  That's your best bet.

I don't think any lender will give you a loan with a fresh unpaid charge off.  Now if it were 3+ years old, and you've shown that you've managed all your bills well since then, then I could see them giving you a loan.