Buying a house/poor credit due to medical bills

[Planogirl]

I have just started looking at mortgage options because I may have to move for work. When I bought this place six years ago it was EASY. Heck I put down more then I had too.

Now.... Oh MY! I am going to have to raid some savings because I am not going to pull as much out of this condo as I need to put down. Basically it's really kind of 20% or no go, regardless of credit rating or debt. When you add in a credit rating issue my bet is it's going to be VERY tough.

Good luck!

A VA loan is (or at least was) 0% down. That is the loan we have and we purchased far less house than what we were approved for. Our payments are reasonable.

OP, there isn't ex-military involved in this is there?

 

[Molliday]

I haven't even seen that option, but to be honest... I haven't done anything but play with some calcuators in the net and of course they don't really have my info (I would never give those things any "identifiable" info like my SS# etc. ) If I do have to move then I will start the "what ifs" and make some decisions. Luckily housing costs are cheaper where I would be going then where I am!

This is through a builder. We're using their mortgage company, so maybe they have products that other banks aren't using? I really have no idea.

ETA: Our earnest money is 3%, whereas other builders are 1%, so there is definitely some give and take.

 

[hpfan100]

Well, thanks for all the replies and honest answers. Let me see if I can clear some things up:

1)We are paying on my daughters medical bills--it is included in what we pay per month, even though I didn't itemize it here.

2)The late items /collections are 3 years old or older, but still majorly impact our scores.

3)The condo is too small for 4 people, and it is not yet on the market. We are working to have it listed in less than 30 days. When we first started looking we started a savings plan specifically for a down payment. We have $ in there, but not 20%. The savings added to what we will get out of the condo would equal 20%.

4)The neighborhood we live in has gone way downhill in the last 5 years. I would never consider purchasing a house in this neighborhood. The values will only continue to go down, which is another reason for my parents to sell now.

5)We can afford a new mortgage payment on top of the condo payment, and we also have an emergency fund. We have never, ever been late on our mortgage or car payments in the past. I had hoped that would weigh favorably towards a loan.

So thank you for your feedback.

I'm not an expert on mortgages but I have some good tips on helping repair your credit score.

First get copies of credit reports for you and spouse from all three reporting agencies. Do not get the combined one.
After you get them, contest all errors on reports.
Next call individual creditors and see what they can do for you.. for example if you have a medical bill that was only 100 or 200 dollars call and see if they will remove it from your credit report if you pay it off in full. Do not settle with them as this is just as bad as collection accounts.
If you do not get the results you want say thanks and call another time...don't give up. Many companies will work with you if you are prepared and aggressive (not mean) when you call them. Cry, ask over and over, call, write, share your personal story...just don't give up. I think the fact that you have starting paying off these debts will give you some leverage with creditors.

I had terrible credit from bills racked up during college and I slowly improved my credit doing this. My score went from 520 to 710 by using these simple tips. it took me about a year to get that increase but you may have faster luck than me.

Here's a website that I found useful:
www.creditinfocenter.com

Don't give up...if you have the money for that payment you just need to get your credit score up so you can buy.

 

[IUTBAM]

Based on everything you've said and with the mortgage market the way it is now, I think that unfortunately you will have to hold off on homeownership for now. Why aren't you considering using the proceeds of the condo sale to pay OFF the medical bills and get that monkey off your back? You could find a rental, get the bills paid off, and then start saving back up for a down payment, and you may be able to qualify once the debt is gone, and you have something for a down payment saved up...

 

[RachaelA]

Why can't you live in the condo long enough to pay off the debt and save more of a downpayment? This will also help your credit. It may not be the ideal situation for all 4 of you to live there, but people make it work all the time.

Honestly, you seem like you want what you want now even if its not going to be possible.

 

[Marionnette]

Well, thanks for all the replies and honest answers. Let me see if I can clear some things up:

1)We are paying on my daughters medical bills--it is included in what we pay per month, even though I didn't itemize it here.

2)The late items /collections are 3 years old or older, but still majorly impact our scores.

3)The condo is too small for 4 people, and it is not yet on the market. We are working to have it listed in less than 30 days. When we first started looking we started a savings plan specifically for a down payment. We have $ in there, but not 20%. The savings added to what we will get out of the condo would equal 20%.

4)The neighborhood we live in has gone way downhill in the last 5 years. I would never consider purchasing a house in this neighborhood. The values will only continue to go down, which is another reason for my parents to sell now.

5)We can afford a new mortgage payment on top of the condo payment, and we also have an emergency fund. We have never, ever been late on our mortgage or car payments in the past. I had hoped that would weigh favorably towards a loan.

So thank you for your feedback.

You didnt say that you were in the process of paying down the medical bills in your first post. Good to see that your on top of them. You might want to accelerate those payments in order to clear your credit report up sooner. I also do not understand how a condo can be too small for two adults and two children. Even if its only one bedroom you should be able to get by on a short term basis. It might be tight but it would be temporary. The simple truth is that there is no magic wand that will make this all better. Banks are not lending to GOOD risks. They arent going to lend to someone who looks like a poor risk on paper. You are good people. You work your jobs. You pay your bills. And your climbing out of the hole your in. Keep at it. Youll get there eventually. Make the sacrifices now so that you can enjoy a new home when things get better. Now is just not the time for you and alot of other people.

 

[sookie]

pull your reports and fico and look at it. that will be the best thing for you to do right now. then go on from there.
i remember when i worked in the hospital with a lady who used to do loans for a small town bank - we were talking about the uninsured and i said how sad it was for this young couple that was in with their baby and had no insurance - what would they do? the lady said that back in the day, they didn't even used to look at "medical debt" as long as everything else was ok if people needed loans. but now - with the collapse - i bet that isn't the case.

 

[hpfan100]

It is great that you are paying off your medical bills. It's always nice to get rid of bills but I'm afraid paying them off will not help your credit score.
Collection accounts stay on reports for 7 years before removal even if you pay them off or are back in good standing. That is a long time to wait. In fact I think it is 7 years from the last activity on account. Which means you could pay them off and then still have that collection on there for 7 more years. ARRGGG
It's best to get them removed from report at all costs.
Good luck!!!

 

[mrsklamc]

It is great that you are paying off your medical bills. It's always nice to get rid of bills but I'm afraid paying them off will not help your credit score.
Collection accounts stay on reports for 7 years before removal even if you pay them off or are back in good standing. That is a long time to wait. In fact I think it is 7 years from the last activity on account. Which means you could pay them off and then still have that collection on there for 7 more years. ARRGGG
It's best to get them removed from report at all costs.
Good luck!!!

It's actually 7 years from when the account was first delinquent. Not sure what you mean by 'get them removed at all costs.' If they are legit, there's no way to do that.

 

[Planogirl]

It's actually 7 years from when the account was first delinquent. Not sure what you mean by 'get them removed at all costs.' If they are legit, there's no way to do that.

You can sometimes get a collection agency to remove accounts if you pay them off. We do see this sometimes but it has to be part of the agreement and I would always get this promise in writing. Most won't (or can't) remove them though.

 

[chrisvip]

You might be able to get an FHA loan with 3% down, but even then they would probably wan't you to pay off your debt first before closing the loan I think. There are some articles towards the middle of the page on http://freemortgagerefinance.org/getting-a-mortgage-with-bad-credit which might be useful to you.

 

[hpfan100]

It's actually 7 years from when the account was first delinquent. Not sure what you mean by 'get them removed at all costs.' If they are legit, there's no way to do that.

You can sometimes get a collection agency to remove accounts if you pay them off. We do see this sometimes but it has to be part of the agreement and I would always get this promise in writing. Most won't (or can't) remove them though.

thanks planogirl for adding that to the mix

mrsklamc thanks for clarifying the dates part...wasn't positive about that.

as for removing at all costs...that means work with creditors to get them removed. Just because they are "legit" doesn't mean they can't be removed. If you are proactive and don't give up you would be surprised what could happen.

Since it is medical bills I would even consider talking to the original creditor also (doctor's office/hospital etc.).

 

[MasonDuo]

Like others have said, your best option would be to rent or use the condo. That would give you a good way to save more money for the downpayment. FHA loans require a pretty decent credit score. Plus many banks are cracking down on even the strongest customers. Save the money while the economy improves and the credit crunch cools down.

 

[DumboPrincess]

I had a busy couple days at work and came back to a whole new page of answers! Thank you, for all the insight you have and for sharing your personal experiences.

To the poster who asked--we are not a military family.

There was an open house yesterday and I talked to the realtor--he knows we are trying to work out financing and will let me know if they get a contract before that is arranged. He knows what is going on and will be emailing me some lenders that might be able to help.

I will be calling some medical collections today. Maybe some will negotiate to remove the items.

We won't be moving back to the condo. I appreciate the suggestions, but it would (to us) be a waste of money to pack and entire household to move back. We would have to put items in storage, rent a truck, etc. Then we would have to move again (more $) when it sells. It will be on the market by the mid to late November. It will def. sell faster without all our "stuff" in it.

My parents are not kicking us out, I just know that $ from my Grandma's estate is running low. They could really utilize the $ from this house to take care of some things. I would rather offer them money every month (which has been refused up to now) than pay to store our items.

I put myself out there by asking the questions. I do appreciate those posters that have recognized we are good people, we do pay our bills on time and in the past, medical bills would not have held us back. We did have a very rough couple of years with my husband and daughter both in and out of the hospital. It was trying emotionally, physically and financially. My daughter had an ambulance ride,cat scans,MRI,brain scans, a helicopter ride from one hospital to a specialized hospital, a spinal tap. Plus 4 days in PICU, and 2 more in a regular room. Our insurance dropped us while we were in the hospital. That is a whole other story, but the point is the overwhelming cost of paying oop for all those items. Looking back, I would have handled some things differently, but at that time, with everything going on I did all I could. We paid what we could after we paid our mortgage, cars and put food on the table.

We pulled ourselves out of the hole and paid off all credit cards (no longer have them, we racked them up trying to pay off the medical bills), paid off our cars and started an emergency fund. We are financially sound, but the credit due to the medical bills holds us back.

I will post a follow up for anyone else that wants to know when/how/if we can get a mortgage. Thanks!

 

[jodifla]

I had a busy couple days at work and came back to a whole new page of answers! Thank you, for all the insight you have and for sharing your personal experiences.

To the poster who asked--we are not a military family.

There was an open house yesterday and I talked to the realtor--he knows we are trying to work out financing and will let me know if they get a contract before that is arranged. He knows what is going on and will be emailing me some lenders that might be able to help.

I will be calling some medical collections today. Maybe some will negotiate to remove the items.

We won't be moving back to the condo. I appreciate the suggestions, but it would (to us) be a waste of money to pack and entire household to move back. We would have to put items in storage, rent a truck, etc. Then we would have to move again (more $) when it sells. It will be on the market by the mid to late November. It will def. sell faster without all our "stuff" in it.

My parents are not kicking us out, I just know that $ from my Grandma's estate is running low. They could really utilize the $ from this house to take care of some things. I would rather offer them money every month (which has been refused up to now) than pay to store our items.

I put myself out there by asking the questions. I do appreciate those posters that have recognized we are good people, we do pay our bills on time and in the past, medical bills would not have held us back. We did have a very rough couple of years with my husband and daughter both in and out of the hospital. It was trying emotionally, physically and financially. My daughter had an ambulance ride,cat scans,MRI,brain scans, a helicopter ride from one hospital to a specialized hospital, a spinal tap. Plus 4 days in PICU, and 2 more in a regular room. Our insurance dropped us while we were in the hospital. That is a whole other story, but the point is the overwhelming cost of paying oop for all those items. Looking back, I would have handled some things differently, but at that time, with everything going on I did all I could. We paid what we could after we paid our mortgage, cars and put food on the table.

We pulled ourselves out of the hole and paid off all credit cards (no longer have them, we racked them up trying to pay off the medical bills), paid off our cars and started an emergency fund. We are financially sound, but the credit due to the medical bills holds us back.

I will post a follow up for anyone else that wants to know when/how/if we can get a mortgage. Thanks!

So sorry you are going through this. It's horrible that insurance companies have been able to kick people off insurance when they are sick! That will end soon, thank goodness.

I wonder if you could arrange for the owner to hold the mortgage, or rent-to-own in the neighborhood you are interested in.

 

[mommyof2princesses]

I personally would be leery about buying a house with 0% or 3% down in this economy. The payments would be pretty big and perhaps hard, to impossible, to handle if jobs were lost. We have owned 2 homes so far as adults. Both of them we put 20% down on and had payments around $700 = $800 a month. This really helped when dh was laid off 2 years ago. With such low mortgage payments and money saved, we didn't have to worry too much. He found a job making much less but it was very affordable since our payments were low.

We just sold our second house...thank God...and although we know we will qualify for a loan with a very low down payment we still put 20% down with that just in case thought. What if he gets laid off or the company closes?

Just a thought.

 

[DISNEYSIX]

I have been originating mortgages for 19 years and you don't need to pay off medical collections in order to qualify for a FHA loan with 3.5% down. All you need is a 620 credit score with some active trade lines. You need to get with an experienced loan officer in your area to take a look at your credit report and advise you what to do. In all actuality, paying on or off a collection makes your credit scores drop in the short-run because it activates the collection account and makes it appear that it occurred the day that you paid on it. Remember, the older a collection account is, the less impact it has on your credit score. However, if your score is below 620, you need to go ahead and pay them off as satisfying them will help increase your scores in the long-run. Good luck.

 

[bumbershoot]

Our insurance dropped us while we were in the hospital.

Have you contacted the insurance commissioner in your state about this?

 

[Molliday]

I personally would be leery about buying a house with 0% or 3% down in this economy. The payments would be pretty big and perhaps hard, to impossible, to handle if jobs were lost. We have owned 2 homes so far as adults. Both of them we put 20% down on and had payments around $700 = $800 a month. This really helped when dh was laid off 2 years ago. With such low mortgage payments and money saved, we didn't have to worry too much. He found a job making much less but it was very affordable since our payments were low.

We just sold our second house...thank God...and although we know we will qualify for a loan with a very low down payment we still put 20% down with that just in case thought. What if he gets laid off or the company closes?

Just a thought.

Our mortgage will actually be decreasing, and we're only putting 5% down. If interest rates weren't as low as they are, then things would be a little different.

I'd rather have that other 15% sitting in my savings account to help me get through the tough times, than sink it into a house, hoping to get it back quickly in a slow market.

 

[DumboPrincess]

More great info--


I just was researching lease/rent to own today, so great to see that mentioned!

And thanks DISNEYSIX for your mortgage experience! It gives me hope!