My husband went into some serious debt about 4-5 years ago. He defaulted on multiple credit cards, a personal loan and has 50k in collections. Unfortuantely he doesn't qualify for bankruptcy because he makes too much money. We really think it's feasible to pay off a lot of this debt in the next year or two. Especially if we are able to make settlments with some of the debt collections.
My question is: Once the debt is paid (even if it is reported as paid and not removed) and his score improves, will his bad history hinder us from getting a mortgage? His score it'sself right now is in the high 500s, and he's been paying his bills on time for the last 3 years. I added him to my cards, etc. Does there need to be a certain time that has elapsed before a lender will consider your appliaction, even if you have paid off the debt?
I would suggest you hook up with an experienced Loan Officer so you can strategy about how to best handle your credit. For example, if you have charge offs, these don't necessary have to be paid off in order to be approved for a loan. Collections are handled differently today when qualifying for an FHA loans. We are required to hit you with a 5% payment of the reported balance and add that to your DTI effectively reducing your buying power. In your case, I would concentrate on opening some new accounts so you can work on bringing your scores. Even this process, has some strategy to it.
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