Now or later?

[Anonymous]

I am a first time buyer looking to purchase next month.
Situation: wife has a fico 0f 740+, I have a 689. I have a student loan account in "special billing arrangement." It lists 120 days behind according to the trade line. The student loan company has given me a letter of confirmation on my 9 consecutive payments since the special arrangement-"payed as agreed", so I have 3 left to complete the deal. Afterwards-in March- it will revert to an account in good standing as a result of making 12 consecutive on time payments as per the "special billing" arrangement. Our debt to income is at 38%including the prospective home. We have very stable employment histories-accountant/teacher respectively. We'd like to put a down payment of 5% on a $225,000 selling price. We're at $120,000 combined income. The moon and stars are aligned and we'ed love to get in on this interest rate/low house price situation as soon as possible.
We have a house in mind. Do you think we could get an approval now with this derog. Is FHA an option in this case? Should we try now or wait until March?

[ShanetheMortgageMan]

Is the student loan federal?  Is it reporting as a charge-off or just 120 days late?  Is there a past due amount listed?  Might just need to catch up on the amount that says it's past due, or if it's federal than you'd need to cure the debt (since the application asks if you are currently delinquent or in default of any federal debt).

Are you buying in a community property state?  How much does just your wife make, what are her debts only?  Perhaps your wife can qualify on just her own.

If your wife can't qualify on her own, and the student loans are federal, can you see about making those 3 remaining payments in advance to speed up that process of changing how they are reported on credit?

Conventional might be another option too depending on where you are buying (due to declining markets).

[Anonymous]

THANKS for the info ,

It's a state teacher loan and unlike the Perkins rehab plan, school officials demand 12 consecutive payments (instead of 9) in order to redo the loan again. My wife can't qualify on her own either. Transunion simply lists it as 120 days past due, Equifax lists-"see lender" and Experian does not list the loan at all. It does list as past due with Transunion. Any parting words of wisdom?

Thanks again

[ShanetheMortgageMan]

Well since it reports a past due amount a lender would require you to catch up on that account before giving you a loan.  If catching up on that account all at once will impair the ability of the state teacher loan to "correct" the reporting history that it would've naturally happened after you made 12 consecutive on time payments, and you'd have the 120 day lates forever, then I'd put off buying until that trade line is rehabbed.  You could purchase now, but like I said the past due amount would have to be paid, and if you are going with conventional financing then your 689 score will give you a little higher rate than if you had a 740 (FHA financing you'd get the lowest rates since all you need is a 620 though).

[Anonymous]

Friday, I simply asked the university to allow me to use the new rehab guidelines on Perkins loans(9 months of consecutive on time payments[instead of 12] as long as you have made at least 1 of the required payments before July 1st 2008). They graciously complied-no haggling-and set up the new payments with the billing agency. In an instant they erased all negative information and brought the loan current! Merry Christmas! They will report the new information on the account at the end of this month. So now, for the hat trick.

I'd like to apply for a loan the week of January 5th-what is the fastest way to get the CBs to reflect this new information? Will a letter from the billing agency stating the updated nature of the account carry any weight with mortgage lenders?

Thanks...

[ShanetheMortgageMan]

Wow that is great news, congrats!  I think that is just about the best Christmas present to one's credit that anyone can receive.

As soon as they report the information to the bureaus it should be updated with them that day or the next.  The only type of letter that would work from the creditor is something specifically stating "The payments from XX/XX/XXXX date until XX/XX/XXXX date were all made within 30 days" or something along those lines.  Can't be "due to your successful completion of your rehab plan we have removed the late payment activity from your credit report".  See the difference?