Pay off old collection and get mortgage

Guest 0.10 Dollars($)

should i pay off an old collection? my friend advised nto to do so? but why? doesn't paying off debt improve the credit score? he said it renews the SOL! but doesn't paying a recent debt renew it? can i get a mortgage after collections?

Niicss · Joined: 03 Oct 2005 Posts: 807 118.37 Dollars($)

Welcome blue_bird,

You friend has rightly suggested to pay off the old collection because that will improve your credit. It is not that you cannot get mortgage with collections on your report. But you will not get the better rates and terms. Transaction of the last 12 months are very important to obtain a new mortgage.

fireyone_02 · Joined: 20 Mar 2008 Posts: 267 -0.19 Dollars($)

Also be sure that you have the money to pay off an old debt. Once you make ONE payment it will restart your SOL. Be sure to get any kind of agreement in writing and don't be afraid to try to get them to accept a ;ower amopunt. Most of the time they will. Hope you get everything worked out. Good luck.

gmakerley · Posted: Thu Apr 17, 2008 5:45 am Post subject:

not only is it beneficial for you to pay old debts - a collection, i presume - but many times it would be a requirement of a lender granting you a mortgage. in these times, you'll generally find that the best interest rates available are on fha loans, and that is a product that will typically require repayment of collections and charge-offs.

having had a collection in the past will not prevent you from obtaining a mortgage, if all else being reviewed is not unfavorable. by that i mean, your income relative to your existing and proposed new mortgage debt have to be in line (affordable), your asset picture has to be reasonable, and your other credit performance cannot be poor.

people are continually able to obtain mortgages despite previous collections history, repossession history, bankruptcy, foreclosure - all sorts of credit issues. your most recent history - how you are paying your obligations currently and in the recent past - will have a larger impact on your ability to obtain a loan than will things that happened long ago.

the trouble with friends is that they have opinions; many times those opinions are not based on fact or reality. to say you should not pay an old collection account is silly, to say the least. the bottom line in anyone's head should be this thought: "did i promise to pay back the money i borrowed?" if the answer to that question is "yes" then it ought to be a pretty simple conclusion that the debt ought to be repaid. unless circumstances completely prevent you from repaying money owed, i don't understand a refusal to pay.

please don't let the misguided advice of others prevent you from obtaining a mortgage.

Guest 0.10 Dollars($)

thanks all for the reply. But isn't it a fact that 2 year old collections doesn't matter much when it comes to applying for mortagge? i mean as the time pass, old debts doesn't have much affect on the score, isn't it?

gmakerley · Posted: Thu Apr 17, 2008 6:27 am Post subject:

anything that has to do with creditworthiness matters when it comes to applying for a mortgage.

a competent loan officer or a competent loan processor or a competent underwriter - for that matter, a competent mortgage lending firm - will analyze your overall picture and make the determination as to whether or not the collection ought to be paid.

do you owe the debt? if the answer is yes, then why is it so hard to pay it? if you don't owe it, that's an entirely different matter.

to fail to repay a debt simply because it is "old" is not considered as favorable when one is analyzing credit.

i don't know if you'll qualify for a mortgage or not, blue bird; i don't know if your credit score is good or bad, but i do know that unpaid collections have an effect on your score. and that effect is not favorable.

clearly, we humans have free will. what that means is, basically, "do what you wish."

gmakerley · Posted: Thu Apr 17, 2008 6:28 am Post subject:

i'm looking at that picture of me right now, and i feel like i should wipe the smile off.

some of the scenarios we are presented with in this business are ridiculous, and they will, at times, take away all your joy.

Niicss · Joined: 03 Oct 2005 Posts: 807 118.37 Dollars($)

I totally agree with you George that if someone has a due debt he should at least try to pay off. It does not make any sense that only because the due debt is old and he need not to pay???? By all means try and pay off the due debt.

banker0679 · Posted: Thu Apr 17, 2008 6:56 am Post subject:

paying it off will restart the SOL, but rememer that you have 'paid it off'.
If you plan on making payments, then that's another story.

I recommend that you speak to a loan officer who can tell you WHICH accounts to pay off. I recently had a borrower who paid off all her medical collections, and was denied by her previous loan officer. FHA loans DOES NOT require medical collections to be paid off, and she paid off the wrong accounts.

I would speak to at least 2-3 loan officers who can help you out with your credit situation. NEVER make payments w/out having something in writing FIRST.

jbarto65 · Joined: 04 Nov 2007 Posts: 592 5.03 Dollars($)

good advice banker, it is always good to have someone like you to advise us on what we should and should not be doing. Thanks for being here and advising.

fireyone_02 · Joined: 20 Mar 2008 Posts: 267 -0.19 Dollars($)

Ditto here banker. Thanks

jbarto65 · Joined: 04 Nov 2007 Posts: 592 5.03 Dollars($)

Make sure that you keep all your paperwork if you do pay off these old bills, you never know when it will come back and try to make you pay again for the same bill. Keep your reciepts and watch your credit report, if some one else picks up the debt and tries to collect on it after you paid it off, you can send them copies of the pay off and hopefully get them off your back.

fireyone_02 · Joined: 20 Mar 2008 Posts: 267 -0.19 Dollars($)

Good advise jbarto. I have heard that sometimes another collector tries to collect the remaining balance or the company doesn't clear it from the report and they have to reprove they paid it. With money being a big issue espacially these days who can afford it twice.

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