So I applied for a VA home mortgage two weeks ago. My scores were 649/625/623 and my wifes were 687/646/630 and the desktop underwriter was coming back with a refer/eligible. We had a chapter 13 bankruptcy filed in 8/2009 (on credit report) and a home surrender in 2012 (not on credit report). Until that point, our debts were high, and I'd say we were at least a 55% debt to income ratio.
Fast forward to our discussion. She said our debt was too high, but couldn't really understand why the DU was coming back with a refer/eligible. Aside of the chapter 13 in 2009, we have no late payments; we have re-established credit (mulitple trade lines over 24 months old with no derogatory). But we do have one medical collection from 2011 - for $729 (the medical collection was for a hospital physicians bill we choose not to pay - the hospital was in network and the doctors were as well - one doctor was out of network). So that is the only derogatory since the bankruptcy.
So getting to the debt. We have $17,200 in credit lines, and we paid those down, going from a 91% utilization to a 14% utilization (we paid them down over 14,000 off their balances). We also paid off a car loan with a $680 monthly payment. So all in all, we shaved off over $1,200 in monthly payments, going from a (24/55 DIR) to (24/43 DIR). I am also guessing (and according to the credit analyzer given to us by the mortgage company), our scores will jump into the 700 range. This is based on our utilization going way...way down.
Any thoughts on if this will help the system give a approve/eligible response? Should I suck it up and pay the $729 collection account from 2011? Anything else I can do?
