Buying a house/poor credit due to medical bills

[DumboPrincess]

Just an Update!

We tried Quicken loans and were not approved. However, our credit was about 100 points higher than the site I went to said it was. We were only 13 points shy of getting approved! Sooo close!

So, I did get a very knowledgable and experienced realtor and he gave us the name of the mortgage company he has worked with exclusivley for the last 7 years. They are a smaller company, local in my area. They are very nice, and I'll get an answer this morning. The loan officer I spoke with is not concerned about the medical collections. They are old, and once I explained the situation she said it would not be held against us in the decision. The biggest thing holding us back is that we got rid of all our credit cards except one a couple years ago, and haven't charged anything in at least 2 years.

As far as a downpayment goes, our loan officer is running the numbers with our current (very small) mortgage included, and one with the sale of the condo as downpayment. Even if we can't get approved with the current mortgage, the equity we have in the condo will be a significant enough down payment when we sell.

I'm glad we pursued this further because it looks like we will be able to get our house! Please send pixie dust this way. I'll update when we have the final decisions on everything! Thanks for listening!

 

[DumboPrincess]

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.

Thank you so much! This is spot on!

 

[scrapquitler]

Please give me your best advice! We are living in a home that belongs to my parents, but it's time to move out (no immediate date, but for my parents financial well being they need to sell this house.

Maybe you can come up with some sort of agreement with your parents that you can buy their house from them on a rent-to-own basis? Use a lawyer, have the contract written up by the lawyer. Your parents get $$ monthly, you don't have to qualify for the mortgage, and you save the hassle of moving.

In the meantime, try to sell that condo.

 

[scrapquitler]

Maybe you can come up with some sort of agreement with your parents that you can buy their house from them on a rent-to-own basis? Use a lawyer, have the contract written up by the lawyer. Your parents get $$ monthly, you don't have to qualify for the mortgage, and you save the hassle of moving.

In the meantime, try to sell that condo.

I posted this previous reply before I read everyone else's replies. I've changed my mind about my answers based on what other posters have said and what the OP has stated.

Here's what I think. I think that if *I* were in this situation, I would do the following:
*continue to pay for the mortgage on the condo.
*move into the condo, even if it is uncomfortable and cramped.
*put all my extra stuff that doesn't fit into storage (paying for storage is cheaper than paying a condo mortgage plus a home mortgage)
*put every single extra penny I could come up with every month (even on top of that potential $2000 that you could spend on a mortgage) toward my medical and collections debts.
*Once all my debts are paid off (medical, collections and any others), then I would start saving big time for a down payment.
*Then (and only then) would I sell the condo and consider buying a new home.

But that's just me....and I would do that only if the lease-to-own thing isn't a reasonable option for living in /buying my parents home.

 

[NVDisMom]

OP- Go to the forum section of creditboards.com. There is a TON of info on there that can and will help you and some very knowledgeable people that can get you going on the right path so you can get this done.

 

[KadysMom]

I hope you get the house!! I was approved through 1800EastWest and I cannot believe we were approved. Our credit scores were not high and still got approved. We had the money to put down and love our house now!

 

[JDUCKY]

First off, NEVER NEVER NEVER NEVER EVER EVER EVER EVER EVER call a collection agency.


NEVER NEVER NEVER.


Doing so weakens your stance and allows them to run roughshod over you and quite possibly getting you to pay on a bill you may not even owe. Collection agencies, esp. JDBs (Junk Debt Buyers) are notorious liars.


You should immediately go here and look into the WhyChat dispute process for medical collections:
http://creditboards.com/forums/index.php?showforum=39

I found several collections on my reports that were not mine and have had others removed that were past the Statute of Limitations or where the collection agency did not provide proper debt validation or violated HIPAA rules and had to delete the entries from my credit report.

You might have a more difficult time being you've already contacted them and setup arrangements but, still, worth a shot to research there and even post about your situation.


Next, contact the three credit reporting agencies (start here: https://www.annualcreditreport.com/cra/index.jsp ) and get a HARD COPY of each report (not an online copy...you want the hard copy as that often contains information not shown online) and work on cleaning up and other baddies that may exist.


Good luck with the process and one thing you may consider is going for a USDA mortgage (you'll have to check the USDA Rural Housing site to find an area that would be eligible...you'd be surprised at how close to some major metro areas that still qualify...*cough*west of Orlando*cough* ) It can actually be truly a $0 money down mortgage and interest rates are competitive (typically 1/8 to 1/4 above average FHA rates)...just be cautious of Yield Spread Premiums (that's merely a nice kickback to the loan originator for a slightly higher interest rate from the bank.)

 

[MrsPete]

This isn't what you want to hear, but I think it's the right answer: If you're 13 points away from qualifying for the loan, you're 13 points from JUST BARELY being able to afford this loan. You should never buy "as much as you can afford". If you do, you'll never have any wiggle room, any comfort zone, any financial buffer. If you get a loan that you can just barely, barely make, every single month is going to be stressful.

So unless the house is THE ONLY THING you want in your life, don't do it.

Instead, wait 'til you can COMFORTABLY afford a mortgage.

 

[NVDisMom]

This isn't what you want to hear, but I think it's the right answer: If you're 13 points away from qualifying for the loan, you're 13 points from JUST BARELY being able to afford this loan. You should never buy "as much as you can afford". If you do, you'll never have any wiggle room, any comfort zone, any financial buffer. If you get a loan that you can just barely, barely make, every single month is going to be stressful.

So unless the house is THE ONLY THING you want in your life, don't do it.

Instead, wait 'til you can COMFORTABLY afford a mortgage.

I took the 13 points away from qualifying as their credit score being 13 points away. That has nothing to do with being able to afford the mortgage. That would be the debt:income ratio and percentage of income the housing cost would be utilizing. Am I missing something?

 

[J3nn78]

13 points from qualifying does not mean they cannot afford it.

 

[DumboPrincess]

I took the 13 points away from qualifying as their credit score being 13 points away. That has nothing to do with being able to afford the mortgage. That would be the debt:income ratio and percentage of income the housing cost would be utilizing. Am I missing something?

Nope, you're right. Credit score, not anything else. According to our loan officer we can "more than afford" the house we want, and the sale of our condo plus our savings will suffice for a down payment.

Whe I started this thread, it was about getting advice due to the old medical collections, and thinking they would have major impact on our ability to obtain a mortgage. Quite often people can afford things long term, but can't obtain credit. That was our situation. It took some research, and making sure we talked to the right people, but so worth it. I would encourage anyone else to do the same.

To all the posters who offered advice and encouragement--I thank you!