VA HOME LOAN DECLINED WITH 713

[Anonymous]

I did allot of reading here looking for people in my situation... I've been working on my credit for almost a year now and i felt at 713 I had enough to actually go forward and buy a home... found a new build, of course they want you to use thier lender to get extra benifits (upgrades ect) so applied and got declined for auto approval... then she reviewed my report and saw i had a charge off this last year.... car loan, the car was stolen and when it was recovered the insurance company totaled the car for only 1K leaving me with 12k left to pay... i had no way to get a car so i had to but one cash (sucks)... loan officer says call USAA since im doing a VA home loan... now my score dropped 4 points from the first denail now usaa runs again... the whole process sound like its going well and comes back and says the only way they will do it is if i pay off the 12k in the next 7 days??? any one have an idea, i dont know anyone to borrow that money from... i've looked at offering a lower amount to pay it off (any done that?), starting payments again? (bank said as long as it shows current)..... any help before i lose the house we spent allot of time finding!!! thank you!!!

[Anonymous]

Yikes, we called USAA today as well and got a preapproval but they told my husband he would need to pay off all collection accounts even though EVERY last one of them are 6 years old, so will be falling off in 6 months.  They gave us a better interest rate than the other lender but the other lender DOES NOT require payoff of collections.  I say SHOP AROUND!!

[Anonymous]

Thank you for the comment, did they say you needed to pay before the pre approval or before closing? At the start the bank said that would need to be paid before closing (which would be 7 months away) I thought YES, I will do everything to pay that off before then.. then she said how are going to pay it off, you only have "x" amount in savings... um oh I thought you meant closing time which is months down the road, she says no around 7 days it needs to be paid.

[Anonymous]

They told us before CLOSING but we plan to shop around as I questioned him if that was a VA requirement and at first he said yes.  Then I said, hmmm, strange because ANOTHER lender stated it wasn't. He then stated it was a requirement for any FANNIE MAE lender.

[Anonymous]

Given your facts it would seem that you are in a jam; the only likely thing would be to contact the creditor and see if you could restart payments and have the loan brought to current status. This would buy you the few months to get it pif, assuming your debt to income ratio can survive the new payment amount. 

I am not certain, but pretty sure that no bank will loan with such a recent charge off, as it would be a simple matter to get a judgement, then wage garnishment, etc. 

Can anything be done with the insurance payout? That sounds preposterous!

[MauiMan85297]

Certain collection amounts can be overlooked (like 3-4k) but that huge 12k amount would have to show paid satisfied or current but doubt a creditor would be willing to show the account current if you start making payments on (YMMV). Your best bet would be to call the company and settle that debt for 30-40% of the balance (4k) and have a family member allow you to borrow that and pay it off.

[Anonymous]

Because your charge-off is still within the statute of limitations, you could be sued for it. If you were approved for the house, the creditor could potentially place a lien against your house. This is why lenders like to have certain debts paid off. I can't imagine with a charge-off that just happened last year in that amount will be forgotten by the creditor. Also, just because you are making payments does not mean the charge-off status will go away. The payment arrangement is now the agreement you have with the creditor to settle the debt. 

Did you GAP insurance coverage with your auto lender? Depending on the scenario, the GAP claim could cover some of the expenses that your insurance company did not pick up. 

At this point, I would do as the others have said and try to settle the debt so they can close the account and it will stop suppressing your scores. If the lender is requiring you to pay in full, then I would get the opinion of another lender who is okay with doing a settlement versus a full payoff. 

[Anonymous]

and heads up do NOT go to USAA because they WILL require you to pay IN FULL, NOT AS SETTLED BUT IN FULL

[Anonymous]

Can anyone suggest a lender that may be a little flexible? i've googled these keywords online and didnt find many answers.... I highly believe i could pay it off before closing in 7 months but how do you convince a lender that you will do what it takes to get it done? I know i may get a comment, pay it off then apply for the loan... honestly i dont want to stir the bees nest with the auto loan before i know if i can actually get honey! lol... thank you all for this help.... i've had two people run my credit and im down 6 points so i dont want to run until im sure its the right lender.....

[Anonymous]

In my case, we are doing new construction. At the time of the prequalification, my husband's scores were high enough to start the process. We used that time to have my lender work with me on fixing my credit and handling some collections. 

To answer your question, I'm not sure what it will take for a lender to take you seriously. I'm sure in your case it will be difficult to prove how you are going to cover the cost of the settlement without having the funds right now. There's so many variables here. Calling the auto lender will not "re-age" the debt. At this point, it may be best to contact them and see how much they are willing to settle for. You could have 30% in your head, and they may not be willing to go lower than 70-80% because the debt is still fresh and they are within their limits to sue you for the full amount still.