Can any experts help me prep for my mortgage apps?

[ShanetheMortgageMan]

Sorry you haven't received a response!   You spent a lot of time preparing and explaining everything in great detail, so I assume it was the amount of questions all at once, rather than peppered throughout the thread in response to someone who initially replied, etc. 

Most down payment assistance programs are designed to be used with FHA loans, but conventional community loan programs are also options, so ask if the assistance is available to use if the 1st mortgage is conventional.  With FHA and at least 10% down, the mortgage insurance drops off after 11 years and the annual MI would be .8% (or .45 with a 15-year term).  The assistance you mentioned would get you to that level. 

Unless the program specifically offers manual underwriting, then with conventional you will almost always have to get an automated underwriting system (AUS) approval through Fannie or Freddie.  For someone who has had delinquent credit it's not exactly black & white on what must occur for one to recieve an "Approve/Eligible", it may be purchasing a home for a lower price so the debt ratio decreases, or increasing the down payment, or saving up additional money in reserves, to using your own funds vs. using gift funds and other small items that can be tweaked on a loan application.  Credit scores and credit history play a big part in getting an AUS approval, so if credit isn't great then you probably will need other compensating factors (items I just mentioned).  

The charge-off that reports monthly late payments isn't helping and it's a small amount, paying it off would improve your chances with automated underwriting, if not now then it later as the last late payment will be even further in the past at that point.  Automated underwriting takes payment history over the last 24 months into strong consideration, if it there are a considerable amount of late payments it may take awhile to replace the late payment history with enough on time payment history to go through.

If a creditor will accept a PFD on a defaulted account, the debt won't fall off credit for awhile, and paying it will not hurt your finances then personally I'd go for it, as getting credit perfectly clean would be my goal.  Any negative account that isn't on credit also helps your chances of an automated underwriting approval.

Don't close any accounts, your open credit isn't very old.  You may need every month of on time payment history possible and older accounts help more than young accounts.

Might want to call EQ to see if they'll do an early removal on Navient, I've heard of one (or more) of the bureaus who are able to do that.  You referred to a "big collection" and Navient is the only large debt, but also labeled it as a charge-off.  Collections & charge-offs are treated the same for conventional, but non-medical collections in excess of $2k must be addressed if it's an FHA loan, either by a payment plan, paying it off or 5% of the balance is used as a monthly payment added to your DTI ($850/mo on a $17k student loan collection - pretty much eliminating your chance of qualifying for an FHA loan).

I don't recommend refinancing the car loan until after, but if the payment decrease is enough (decreasing DTI) then it could possibly offset the negative effects to credit.

I'd do the small cleanup items mentioned above and see where that gets your score, at that point you may be able to qualify for FHA.  For conventional, it could be anywhere from right after to even a year out... buying a less expensive home so the debt ratio is low enough could be the trick to speeding up when that occurs. 

[Anonymous]

Thank you for the detailed response, Shane. I really appreciate it. 

I already know I can use a conventional mortgage or an FHA with the down payment assistance, so that's good. It sounds like you're saying that I will just need to apply for a conventional and let the loan officer play with different scenarios/factors to see if I can get an automatic accept? I suppose I assumed that may be the case, I was just wondering if my >4yo delinquencies would be too much to overcome. 

I didn't realize automatic underwriting took into account the status of delinquencies (paid versus unpaid) so I will absolutely pay off that small c/o immediately. Thank you! It is with BOA, who refuses PFD sadly.

Yes, you are correct, Navient is a c/o and not a collection. It is now reporting only to EQ and I will start attempting to gain an early exclusion with them on 8/1.

My only collections are medical and <$400 total over two accounts and only reporting to EQ. They are NOT valid (insurance billing error) but have been such a thorn in my side. They WILL PFD, but I don't want to pay if I don't have to, as it truly isn't my debt. In your opinion, will removing those make any difference in my chances for automatic underwriting on a conventional? They're so low dollar, and medical, and only on one bureau, but maybe I'm deluding myself and should just pay up to make them disappear. 

Again, thank you so much. It looks like I will be paying off the small c/o, not closing any cards, and not refinancing (it would only lower my monthly payment $25) unless an actual loan officer tells me otherwise. 

[ShanetheMortgageMan]

You are welcome.  Correct, for conventional the loan officer would need to be creative with automated underwriting.  If your loan officer hasn't heard of that term, that is a sign to continue to look around.  The down payment assistance program probably has a list of approved lenders that you'll need to utilize, so that'd be a starting point.

Even though the credit report says it's a medical collection, automated underwriting doesn't treat them any differently than non-medical.  A collection is a collection.  Getting them deleted would be best and the amount needed doesn't seem to be much.