A co-signer typically only helps if you are having trouble qualifying on your income. It doesn't normally help with regards to lower credit scores.
Were you declined because your middle credit scores were only 640 or based off of the collections? If it was simply due to scores then check around because although a lot of lenders require all borrowers to have middle credit scores above 660, there are some out there that will still go down lower than that.
If you were declined by FHA's underwriting system then that is likely due to the timeshare and you will probably have to pay that off. An installment debt, especially housing related like a timeshare, is looked at much more seriously than a medical bill.
At any rate I would check around with a couple local reputable lenders and get a second opinion and some insight into exactly why you werent able to get preapproved.
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Weichert Realtors, Goodchild Homes
1440 Hicks Rd., Suite#200
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The seller is not obligated to answer or respond to any offer, it is silly as they have an interested buyer and should at leats counter iwth their best offer. As for you buying, you need to assess what the property is worth in todays market and not base your offers on asking prices. A good buyer broker can provide you with a broker price opinion to tell you the market value of the property. You do not know if the sellers price is at market value already or way below and is already a deal or way to high. At this point if you are not getting an aswer i would move in. good luck with your home search... more