Credit Score

umcneal · Joined: 24 Feb 2009 Posts: 2 1.80 Dollars($)

Hello. Is it true that you can get an FHA loan with low credit score right now? I'm working with someone(credit repair company) to negotiate collections and charge offs and scores have increased slightly. However, when I talk to National City, Credit Union, etc., they tell me I would have to wait about 1 to 2 years. On the other hand, I have a broker I am working with who tells me that regardless, if I get my scores up to 580 he could get manual underwriting. What are your thoughts on this?

msnover92571 · Posted: Tue Feb 24, 2009 2:36 pm Post subject:

Hi umcneal the lowest you can have is 580 to even qualify for a fha loan. What is ur score right now? And they check for work history of at least 2 years.

Missy12342008 · Joined: 24 Feb 2009 Posts: 19 10.57 Dollars($)

my husband and I were going to try this but my credit score is a little below this as they take the middle number. anyway you need to have the lowest score of 580 and they do check employment of at least 2 years also you can't make over a certain amount of money or you won't qualify for this type of loan I don't remeber what the limits of that are.

hope this helps even thou it is pretty much a repeat of what msnover had said.

msnover92571 · Posted: Tue Feb 24, 2009 3:12 pm Post subject:

Thats correct missy there is limits on certain stuff to qualify for this type of loan.

umcneal · Joined: 24 Feb 2009 Posts: 2 1.80 Dollars($)

My highest score right now is 540. This has jumped from 490 something since last December. What about collections and chargeoffs? I have a few of those on my report. Some date back to like 2003. This credit repair company is supposedly giving me advice as to which ones to pay(this also includes negotiating the debt as well). I only have one revolving account with no late payments. That's about it.

With an FHA, do your chargeoffs have to be paid in full or what if they are negotiated?

elnoralittle · Posted: Tue Feb 24, 2009 7:06 pm Post subject:

My thoughts are this,
first a broker cannot promise you what your score is going to go up to. There is no garantee as to how the negotiation of your credit card is going to impact your credit.

Reason being this, debts/collections that are old, but still showing on your report, while the still have impact, the impact isn't as significant as debts that are more current. Renegotiating the terms of those collections can bring those debts more current thus having more of a negative impact on your score.

Secondly, if your broker is telling you that you should renegotiate with a credit repair agency, that might reflect like consumer counseling in the eyes of an underwriter. Under FHA your credit under a program like that would have to have a clean history for atleast a year. Underwriters typically examine 2 years history, but in some cases will utilize the last year. On a manual underwrite on questionable credit, the 2 year history is more likely.

One other thing, Brokers tend to broker deals. Unless the broker has already found a home for your loan, he cannot promise that this will work. He will more than likely shop for someone to make it work. If you are going with a broker, it is a good idea to do your research about the company he works for and his experience. I only suggest this b/c your loan is borderline as it is.

Third, minimal credit score for fha is 580, true, but some investors (many) are now requiring a minium of 620 regardless.

under FHA it is up to the discretion of the underwriter as to what collections should be paid or not paid. The underwriter needs to ensure that the collections are unlikely to turn into judgements that can later be secured against the property that the lender has a vested interest in.

My suggestion to you is this. Do try to re-negotiate the terms of your collections. Many will take less than what you owe on them or reduce the interest. There is obviously a reason for your credit going in the wrong direction. It is a great idea to get your credit on track, but more importantly to maintain your credit on the right path.

Try to pay the collections off and maintain a stability. You don't want to go into a mortgage that you later can't afford. Putting the minimal amount down on a property and trying to keep your credit afloat and pay off collections can be a difficult situation to get in.
waiting the 1 to 2 years might not be a bad idea.

Good luck with the descision that you make. I hope I have helped.

Posted: Tue Feb 24, 2009 8:00 pm Post subject:

Thanks Elnora! Yes this has helped alot:)

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