Trying to buy a house (FHA new guidelines making it hard!) What would you do?
My husband and I have been working on our credit to get approved for an FHA loan, we got our score up but we recently found out about the new guidelines that your collections accounts can't exceed over $1000. We have around $7,000 in collections..but paying them off is nearly impossible. The only option would be for us to move in with my parents for a year and put nearly all we have every month towards the collection accounts. Either that, or wait around 6 years for everything to drop off..but we wanted a home for our 1 year old before she starts school. If you were in my shoes what would you do? Please help..
Go With The Flow, we went to the bank a year ago and she told us that they only cared about the past 2 years and didn't even look at the older accounts and the credit score was their biggest worry. Then we get our score up and now we have to pay back thousands of dollars in old debts before being considered for a loan, it's BS. Plus, things do drop off after 7 years, I've had quit a few things drop off after 7 years and if it doesn't drop off, a dispute will take care of it.
Please, I'm just asking advice on what would be the thing to do here...
- LandlordLv 77 years agoFavorite Answer
This is not new. You never would have gotten past underwriting if you are screwing over people who gave you credit. It was bullshit that they only cared about your victims in the last 2 years.
You should re-examine your ethics. Your attirude to steal what you can and screw over anyone who trusts you will not get you anywhere in life.
- ?Lv 77 years ago
I'm more than a little perplexed why you think you're ready to buy a house when you can't fulfill your current obligations, and can't seem to come up with a measly $7000. If $7000 sounds like a lot to you now, what on earth are you going to do if your house needs a new roof or your furnace complete breaks and needs to be replaced? You won't have 6 years to cough up the money for a major home repair when the time comes. It's not a matter of "if" - it is absolutely a matter of WHEN. Most financial planners recommend you budget 3% of the home's value for home repairs every year. If you're buying a $200k house that means you'll need $6000 every YEAR for repairs.
If I were in your shoes I'd pay off the money I owed and sit down and make a realistic budget to figure out what is actually a reasonable expectations and make sure it's planned and budgeted for.
I would also stop and readjust that attitude of yours that you only have to wait out your debts and they disappear. What the heck are you doing, intentionally not paying the money you owe? This attitude is not only immoral, but it's going to burn you really bad when they start garnishing your wages and you'll be lucky to afford rent let alone a mortgage. Want to buy a house? Start acting morally and financially responsibly which means paying all the money you owe to everyone, not just trying to ignore the problem until they give up on you. Lenders will not give you the time of day let alone a mortgage with this attitude.
- linkus86Lv 77 years ago
The $1000 collection rule is nothing new. It has been around for decades. You should also be aware that no one item of that $1000 can exceed $100 too. But you also should be aware that often, old medical debt can be overlooked. Ideally you need a loan officer who is an expert FHA originator rather than a random one. If you can work out a payment plan with those you owe, those old debts can turn into current debts allowing you to qualify sooner.
- BobLv 67 years ago
I have attached a link to the FHA guidelines that specifically states:
"FHA does not require that collection accounts be paid off as a condition of mortgage approval. However, court-ordered judgments must be paid off before the mortgage loan is eligible for FHA insurance endorsement."
Lenders often have their own guidelines over and above those from FHA, but they generally won't require medical collections to be paid. You can contact the creditors to work out an installment plan or see if they will settle for less than the full amount. If you make installments the lender will likely include them in your debt ratio. You may also try another lender that may be a bit more lenient.Source(s): Licensed Loan Officer in Ohio
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- M WLv 77 years ago
It's not exactly B.S. that they want you to pay up your old debt. They just aren't going to take a chance on you because you might do it again and default on the mortgage.
Unfortunately, not everyone gets to buy a house when they want to. It's not the right time for you, stay where you are for a while and try to pay off what you can.
You seem to be of the mind set that you can run up debt, not pay it and all will eventually be forgiven. That doesn't look good to lenders. File bankruptcy now, wait 5 years, then apply for a mortgage. Your 1 year old doesn't care where she lives, so that's not a good reason.
You got yourself in debt, you need to fix it yourself.
- Go with the flowLv 77 years ago
Actually before you had to have NO items in collections.
Allowing $1,000 is something new. To make it easier to qualify.
Around for about 4 moths now.
I heard about it on TV.
I remember thinking this was an insane thing to allow.
You do not want a house with items in collections.
These companies will eventually sue you (they have years to do this).
They can garnish wages and go after assets.
They can take 25% of your pay.
That's why lenders want clean credit reports.
Things do not just drop off in 7 1/2 years.
That is a myth. Or perhaps with small amounts under $200.
They will sue and get their money.
They wait as long as they can. Perhaps in the hopes that you will have money later on.
- 7 years ago
Your only hope is to put any excess income into paying stuff off.
It's not BS. Why woudl someone want to lend you a massive amount of money when you have shown the inability/unwillingness to pay back much smaller amounts? Put yourself in their shoes for a minute. Also be reminded that the bank doesn't make the FHA guidelines.
- JanellaLv 77 years ago
move in with the folks, and pay off the debt.