Anonymous
Anonymous asked in Business & FinanceCredit · 8 years ago

Can I get an FHA loan with outstanding collections debt but an excellent co-signer?

I am hoping to qualify for an FHA mortgage loan. My credit score is 583, with about $7,000 in outstanding debt. A large portion of this is an eviction, and many are medical bills or traffic citations. Most of these are from 2007 or 2008, and have not been settled or paid. They are due to fall off of my credit report in a few years, and the payment arrangements would extend about that long, so I have saved that money instead.

I have held a good job for about a year now, I make about $2,250 monthly. I have no loans, credit cards, or any recurring debt other than regular utilities & rent.

My father has a credit score of 791, a lot of home equity, investments, retirement, savings, etc. and is willing to Co-sign on an FHA loan for myself. My question is, with an EXCELLENT co-borrower and me as the primary, will it be possible for me to get a loan with my current outstanding debt? Will my bad credit reduce the chances of me being approved, regardless of how perfect his credit is? Please help answer, I cannot find a straight answer anywhere, and I don't want to "just apply and see what happens" and have a hard inquiry on my credit report. Thanks.

Update:

I do have fantastic payment history on other accounts, but of course, these are not being reported. I paid off 2 Car loans totaling $16,000 over 12 months, I have paid rent for 8 years (the eviction is an apartment I leased and left when I divorced my husband, he defaulted, debt is in my name) And I COULD pay off all the outstanding debt at once (although many of the medical bills are disputable because my insurance paid them, and they have not been reporting to the credit agency since 2006-2007) Would that be a good next step, and then maybe taking out a CDL loan to repair my payment history? Thanks!

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  • 8 years ago
    Best Answer

    FHA requires all past debt to be taken care of. Paid.

    Ask here how to negotiate settlements or get a book on Credit Repair from your bookstore.

    Collection agencies tend to sue right before the statute of limitations is up.

    Not sure why people believe that old debt simply drops off.

  • 8 years ago

    Sorry, but with a credit score in the high 500s, you will NOT qualify for a mortgage, FHA or otherwise. FHA needs at least 620 and some banks are as tight as 640 to 670 to get an FHA. Why do you think houses are not selling? People cannot get loans! LOL

    Even IF you had a 620 score, you would be required to pay off any outstanding bad debt you have. Your fathers score is not going to help in this case. And, really, he would be foolish to cosign. You need to clean up your own mess, get your score back to where it should be and then get your own home loan.

    Another hurdle in front of you is the length of time on the job and the lack of current credit. You need a 2 year history on your job, and also need to have some open credit accounts that are being used wisely.

    I would say you have another 2 to 3 years before you can get a mortgage.

  • Anonymous
    3 years ago

    For Finance and credit solutions I always visit this site where you can find all the solutions. http://INSURANCEANDFINANCETIPS.INFO/index.html?src...

    RE :Can I get an FHA loan with outstanding collections debt but an excellent co-signer?

    I am hoping to qualify for an FHA mortgage loan. My credit score is 583, with about $7,000 in outstanding debt. A large portion of this is an eviction, and many are medical bills or traffic citations. Most of these are from 2007 or 2008, and have not been settled or paid. They are due to fall off of my credit report in a few years, and the payment arrangements would extend about that long, so I have saved that money instead.

    I have held a good job for about a year now, I make about $2,250 monthly. I have no loans, credit cards, or any recurring debt other than regular utilities & rent.

    My father has a credit score of 791, a lot of home equity, investments, retirement, savings, etc. and is willing to Co-sign on an FHA loan for myself. My question is, with an EXCELLENT co-borrower and me as the primary, will it be possible for me to get a loan with my current outstanding debt? Will my bad credit reduce the chances of me being approved, regardless of how perfect his credit is? Please help answer, I cannot find a straight answer anywhere, and I don't want to "just apply and see what happens" and have a hard inquiry on my credit report. Thanks.

    Update: I do have fantastic payment history on other accounts, but of course, these are not being reported. I paid off 2 Car loans totaling $16,000 over 12 months, I have paid rent for 8 years (the eviction is an apartment I leased and left when I divorced my husband, he defaulted, debt is in my name) And I COULD pay off all the outstanding debt at once (although many of the medical bills are disputable because my insurance paid them, and they have not been reporting to the credit agency since 2006-2007) Would that be a good next step, and then maybe taking out a CDL loan to repair my payment history? Thanks!

    Follow 6 answers

    Source(s): For Finance and credit solutions I always visit this site where you can find all the solutions. http://INSURANCEANDFINANCETIPS.INFO/index.html?src...
  • 8 years ago

    You've got a minimum of three years before the debt falls off your record (debt falls off at 7 1/2 years). FHA will not lend until you have had 2 years of perfectly clean credit which means that those 2008 debts will have to be paid or you have to wait until at least 2015 to apply. ALL (yes ALL) applicants on the mortgage have to have clean credit. And as pointed out, all this assumes none of the creditors decide to get a judgment against you (assuming the debts remain under the SoL in your state) and a judgment lingers for 10 years.

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  • 8 years ago

    It is not gonna happen. Both co-signer's credit is taken into consideration. Your score is simply too low to qualify. Also, mortgage lenders will require that you resolve all derogatory items on your creddit report.

    Just to clear up the conflicting info the two other posters provided, derogatory items age off your credit report 7-1/2 years from the date of first deficiency. This is per the FCRA and nothing restarts this clock. This does NOT mean the debt is no longer owed or that collection is unenforceable. It just means that the item can no longer be reported to the credit bureaus.

    The Statute of Limitations (SOL) is the time frame to bring lawsuit. It varies from state to state and typically starts from the date of last activity or last payment. Even if the SOL has passed, this also does not mean that you don't still owe the debt. It just means that the creditor will lose in court if you use the SOL as an affirmative defense.

    Source(s): BD
  • 8 years ago

    Almost certainly not.

    "They are due to fall off of my credit report in a few years, and the payment arrangements would extend about that long, so I have saved that money instead." is not a valid excuse and simply shows you aren't capable of handling debts.

    "I have no loans, credit cards, or any recurring debt other than regular utilities & rent." This is because you are unable to get any sort of credit not because of any personal choice.

    If you have a 'good job' you should concentrate of living frugally for 6 months and pay off as much of your debts as you can. At least then potential creditors can see you have made an effort rather than simply waiting it out.

    "Not sure why people believe that old debt simply drops off."

    @ Angry Bird: People believe this because it's true. After 7 years a debt is no longer enforceable, which is exactly why the Asker is opting to simply wait.

  • 3 years ago

    Eviction Loans

  • 3 years ago

    Great answers given

  • marta
    Lv 4
    3 years ago

    Informative replies, just what I was searching for.

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