FirstSource (or any other mortgage buff)

[Corrine]

I you don't mind. I'll try to make this brief. DH and I are going to the bank next month to apply for our first home loan. We've already spoken to the LO and she said we will most likely be looking at an FHA loan. Here's the situation. My credit is Good and hubby's is fair. I don't work (but do have CS considered as income) and combined, we both bring in $50k a year. Hubby also has an excellent work history. We are looking at a total property cost of $140k. We already bought the land for $10k (ours free and clear), we are going to put down another $10k plus $1k in permit costs I have already paid and pay all the closing. We are looking to need a loan of about $120k.

Now, we were warned that Hubby will be the primary borrower and because his credit score is bad (hopefully once I get those Plains Commerce bast@rds off his CR it won't be so bad) we might have problems. The bank asked us to go to CCCS, which we did and have our cute little certificates to give to the bank. They also asked us to explain, in writing about our credit problems, namely a car repo in '01 which we settled on and a $13k medical bill.

Situation was, I got pregnant in early '01. I was fired from my job of 5+ years for missing too much work (eventually my ex-employer paid me a settlement for FMLA violations, retaliation and gender discrimination.... but that is besides the point). Conveniently, my ex-employer also fired me the day after they learned the child I was pregnant with had birth defects. We had to let his car go back and ended up having one $13k medical bill (pretty decent considering the bills started out at $200k+). We went to the bank in August of '04 and these two things were their issues. They also requested us to submit a statement as to why the $13k was unpaid (which we did). That loan fell through because the house didn't appraise which brings us to now.

I have pulled DH's credit report and the $13k debt is gone (crossing my fingers it stays gone) and I am working on the one last bad thing on DH's CR (Plains Commerce, which we also couldn't pay during that time but eventually did.... only they are still reporting an owing balance). Do you think our chances of getting a loan are decent? Any pointers on what else I might be able to do to up our chances of approval?

[firstsource]

From what you have said here, the only issue would be collections. You will have to have the collections totally taken care of before getting an FHA loan. I would be concerned about the medical collection account popping up at some point, unless you paid them or took care of the account.

Not knowing your credit, if you can not get an FHA loan, you might consider a sub-prime loan. If a 130K home is built on a 10K piece of property, chances are that it will appraise for much more as a finished home, and you will be doing a refinance instead of a purchase, so it will be at "current value" of when you get the loan. Even if it did not have the normal increase in value, you would be looking at about a 90% LTV (loan to value) loan.

Charles

[amortgageman]

The collection may be gone off yor credit report, but is it really gone?

If you want to make the purchase real comfortable, consider negotiating a payoff on the collection, and carry on. An underwriter would be able to see the cause of the medical collection in the first place (from your paperwork in the lawsuit).

Have you tried to make payment arrangements on the debt? If you have no ghosts in the closet, you will feel much more comfortable regarding your approval.

You mentioned CCCS, was that for a homeowner's class, or are you enrolled in a debt repayment program now? If you are enrolled in a payment plan, FHA will want to see 12 months payments.

Subprime is also a good possibility since you already own the lot, and will have equity in your purchase.

[Corrine]

The CCCS class was not for debt consolidation as we have no debts. We paid all but one thing, which is the medical. The class was taking what would be our mortgage payment and then setting up a budget to see if we could afford the payments. It also went over things like setting up emergency funds and where you should start making cuts to your budget if a financial problem ever comes up.

The problem with the medical is that the bill was partially paid by the insurance. The insurance company sent me a statement saying our owed portion was a little over $700 but the hospital never sent us a bill for that amount. We never got a bill for anything. The first time we found out they wanted the $13k was when we pulled our credit report last spring. I just gave the bank paperwork proving they actually got paid $2,500 (knocking the bill down to a little under $11k) and the paperwork saying our portion is $700.

I also said I would be willing to pay that amount immediately. But I won't pay that until the CA says the debt will be paid in full. I did contact that CA (NCO) and asked them to validate the debt but they sent me paperwork for some other woman's account saying she owed a little over $1k. It was really nice of them to send me info of her debt but I wanted info about my own. I never heard from them after that letter and now the entire account is gone.