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Charles help please your expertise is greatly needed!!


Lil Smurfette
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Hello Charles:

We are really in need of moving to a more spacious home. We have a large family (six of us) and we are currently renting a 1100 square foot home. Prices in our area are really going up quickly. We are wanting to buy a house in the $200,000 - $250,00 price range.

We have spoke to a lender already, who said that she feels that we can get approved for a FHA loan. My DH does not have a fico score (no credit), and my ficos are; TU-501, EQ-528, EX-535. I am currently disputing some things on my credit file which are due back in the next couple of weeks.

What type of interest rate do you think I will receive if we go forward right now. We're afraid that if we wait the houses will go up and be more than we can afford. The loan officer says that we qualify for $270,000 (with our combined income minus the debt ratio.

One other thing my scores were in the 600's a year in a half ago, but I was off work for 7 months due to medical leave. So, four out of five of my credit cards were charged off.

CC-A; Charged off 08/02 for $477;will settle at $286.00

CC-B; Charged off 11/02 for $1360;have not been able to get in touch with them.

CC-C; Charged off 01/03 for $725;will settle at $365.00.

CC-D; Charged off 04/03 for $2760; will settle at $1,500 or can make monthly payments to the CA until paid in full.

*Now the loan agent that we have been talking to said that we shouldn't pay these CO's until escrow, because it will just make the date current. Is this true, how do you think we should handle this. We plan on starting the loan paperwork in September? :o

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Rates are going up very VERY quickly. It is hard to believe. FHA 30 is at 6.5, but probably will be higher today.

I would suggest that you speak with Credit Cards A & C and tell them that "the check is in the mail" if they will write you a letter to the effect that it will be reported to the cra's as "paid collection account".

I would make a note of your efforts as to how you tried to contact creditor B, and write an LOE (letter of explaination) about why these 4 were late,and your efforts as to how you tried to make arrangements to take care of B.

When you start making payments to D, ask them to change the status of the credit reporting item, to indicate that you are making payments now.

FHA is mortgage/rental history driven, keep or get your last 12 months rental checks (PS> Please everyone that is renting, keep your copies of your rental checks, if paying by Money Order, keep those copies-YOU WILL NEED THEM when you purchase a home. If you get in that habit, then 2 or 3 years from now, or whenever you decide to purchase a home, you will have them.) Verification of Rents work, but check copies are MUCH better, especially if this file needs to be manually underwritten, which it probably will need to be.

Best of luck. Sounds like you have a close family.

Charles

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Charles, thank you so much for answering my questions so quickly. I will start gathering all of the required documents to get this loan process up and going.

Just one thing, you are saying that I should go on ahead with the loan now before it gets any worse right?

Also, paying off those charge offs will not hurt my credit score any will it? Because I do want to pay them off now. Do you have any specific questions that I should be asking my lender?

Will my DH having no credit mess up things are will they just go off of my credit (being that I am not the co-buyer).

Thanks, :D

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Charles, very funny :)

But to answer your question yes, I make close to $4,000 a month alone, with my DH we gross monthly $6,000+. So, yes they are definitely using his income. Our debt going out is $600.00, not really much I suppose.

How much do you think we will qualify for with the figures listed above. Also, I have been told that we should try buying a new house verses a resale because there are more incentives with new homes is this true? Can you use a FHA loan when you apply for a new home?

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Yes, FHA actually likes homes build after 1994 better, will let you cheat on the Debt to income ratios a bit.

I would have to know more info before giving my opinion as to how much you qualify for.

What are your minimum credit card payments? How much are your car payment? How much are taxes and insurance going to be for the home of your choice?

Charles

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Okay here it goes:

Our car payment is $580 a month, we have one gas card $10 mininum payment, and a jewelery account (which will not be included) because we'll be done paying it off in November.

I have no idea what the taxes and insurance rates are. We live in Cali. (very expensive state) so maybe this information will help you out.

So, please give us all the advice you have to help out our situation. We really need a bigger house Charles. :cry:

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Yes, that is fine with your husband no/scores. The lender can develop a credit profile if the automated system (which lenders always try first) does not pull stuff up on him.

The way that you get a credit profile built up for him is:

If his on the lease, he gets credit for those payments.

If his name is on any utility bills, same story.

Etc. Cell phone bills,

If he is indeed a "ghost", they will work through that.

(I have only seen one "Ghost" in my time, and we created a profile on her with car insurance payments and renters insurance.

Charles

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Thank you so much.

I just received one my disputes back. One of the charge offs that I have was disputed as balance history is incorrect. They updated the account by taking off the balance history, but it still shows as a unpaid charge off 04/03. I am going to try to get the OC to re-age the account, since it has only been three months.

Charles how do you get around it with FHA if you are showing a charge off or late within the last 12 months. I was on medical leave for seven months last year. Prior to that all my credit cards were paid on time. I just want to know if an explanation letter will work. I have chosen a lender for sure (just let someone run my credit report). But the lender I've been talking to is great. But she is not an FHA expertise either.

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Hopefully she works with a lender that will do a manual underwrite for FHA. If not, find another broker/loan officer.

This is a real judgement call for the underwriter. Make sure that the LOE tells exactly what happened, why you wont probably ever need to go on medical leave again etc. Letters Of Explaination are where the client has to sell the underwriter.

Charles

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