All, I've been preapproved for a FHA loan under some conditions and one of them is all credit accounts must be paid or brought current. My problem is if I pay these charge offs/ collections my credit score is gonna plunge (well if it plunges anymore it will hit the earth). Do you know of any other lender that will not make a big deal of charge off/collections as long as you haven't had any in two years ? I can understand them wanting you to pay any accounts so you won't get sued but these debts are past the SOL and are legally unenforceable. If I meet there terms I'm gonna hurt my credit even more with all these PAID COLLECTIONS / PAID CHARGEOFF marks. I don't know what to do. I want a house sooooo bad at the cost of trashing my credit even more. Confused person.
A collection account hurts no matter what. It doesn't matter if you pay or don't pay, it is still there and lowers your score. As far as paying the collections, I would think that your score would stay the exact same. Just my opinion.
Also, If you do pay them, keep an eye on them. I've seen paid collections suddenly get reaged after they are paid. On a side note, what were your scores when you got preapproved? Do you know what the rate is/will be? Just curious as we're thinking of going FHA this spring.
My scores were between 505 - 545 on all three. I won't know what rate I'll get exactly but they said it will be between 6- 6.75%. Honestly I don't care about the rate I can always refinance. Once you live with a slumlord in a cardboard box with carpenter ants sharing your groceries you just want a house. I'll worry about long term later when my credit is crystal clean. Right now I'm trying to get in a home of my own at whatever cost. I'm sick of renting to slumlords.
Who's offering you 6% to 6.75% with a middle FICO score of somewhere between 500 and 545? You're worried about "refinancing later" ?? Depending upon your loan details, anything in the 6.xx range is a PRIME loan. Sounds fishy to me. I'd read the fine print. What are all your other costs and potential penalties?
Edoggie, I can relate. I had to pay off several old chargeoffs to get my mortgage. I did receive an awsome rate though. FHA is much much more forgiving than conventional. I got a 2/1 buydown (seller paid for) of 4.29/5.29/then 6.29% over the life of the loan. I'll never have to refinance! Could you do faxed settlement offers to these companies? If you get them to settle for deletion of the account after you pay (pennies on the dollar!), you can have your loan officer fax the papers to the CRA's and your credit reports would be updated in like 72 hours. I wouldn't let them know (the CA's)that you are doing this to by a house though. They would use it as leverage. If they know that they can't get any money from you any other way, they would be stupid not to settle for deletion. After all they are in the business to make money. I offered for settlement with one company who rejected my offer. I said ok, fine, sorry about your luck. I thought that you were in the business of making money. Well, a few weeks later they called and left a message on my recorder that they had some exciting news for me. They had decided to take my offer. Imagine that. I played the waiting game. Believe me it was hard, but it worked. I really hope this situation works out for you and you get your house. It's a great feeling. Don't worry though. The rates aren't going up for awhile. Heck, you might be able to get better in a month! I'm rootin' for ya!
The solution Have your attorney or the bank or broker hold the money in an escrow account while you close, and then pay them off.
