Repaired credit, middle credit score 659(Identity Guard), rebuilt credit last year with a personal loan and two secured credit cards.

Asked by Quancaylacorey, Cartersville, GA Wed Oct 30, 2013

Also obtained two unsecured credit cards this month. My question is, I have 2 charge offs, one falls off February 2014($1300) and the other April 2014($1400)....will a lender overlook these if I apply for a home in January 2014? If I decided to apply for a home in December 2013, can I get pre approved and pay off at closing? Do lenders allow me to pay off charge offs at closing? and finally, how long do I need to wait before I apply if the above questions are true if I just obtained two new credits in September and October 2013? Is December enough time?

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Team Lee Hom…, Agent, Marietta, GA
Thu Oct 31, 2013
Here was the response from our trusted lender:

You may actually have better luck going with a conventional loan to 95% loan to value. You may be able to obtain FHA financing depending on what the reasons were for the charge offs. The best advice is to meet with a reputable lender face-to-face and have your profile run through our desktop underwriting system. You have obviously done your homework and it seems that a pre-approval appointment is the next step.

Please feel free to call or e-mail me to set an appointment. My team will be happy to help.

Michael Anthony
Access National Mortgage
0 votes
Rodney Mason, Mortgage Broker Or Lender, Atlanta, GA
Wed Oct 30, 2013
No, HUD guidelines do not allow a lender to overlook any collection account/charge-off/lien/judgment that is listed on your credit report. This is because a pattern of previous derogatory items may reveal a disregard for the importance of credit and paying all accounts on time.

New HUD guidelines on collection accounts took effect on October 15th. There is a difference between collection accounts and charge-offs though. You would need to make sure the account is listed a charge-off on the credit report and its not actually a collection account.

Payoff of Collection Accounts
· FHA does not require pay off of collection accounts as a condition of mortgage approval.
· For loans with a cumulative collection account balance of $2,000 (not including medical) or higher the underwriter must perform a capacity analysis including any of the following actions:

o Pay off of the account(s) prior to, or at closing (verification of acceptable source of funds required).
o Payment arrangements made with the creditor (documentation is required such as letter from creditor, credit report, etc. showing the monthly payment amount). The monthly payment account must be included in the debt ratio for qualifying.
o If no payment arrangements can be confirmed, must qualify using 5% of each account balance as the monthly payment amount.

HUD does not always require the pay off of a charge-off account. That would be up to the Underwriter based on a number of factors. If required, any open derogatory account can be paid off at closing.

If you are looking to purchase a property, working with a knowledgeable and seasoned loan officer is critical in today's market. Getting Pre-Qualified is the only way for you to find out your mortgage options. To get Pre-Qualified for your purchase, you can submit your request online at to get started.

Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at
Licensed in Alabama & Georgia with over a decade of mortgage lending experience.

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203(k) Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing.
0 votes
Team Lee Hom…, Agent, Marietta, GA
Wed Oct 30, 2013
I am asking my preferred lender this question. Once I get a reply I will let you know.

Jonathan Lee
0 votes
Thank you! If I could buy today I would! But I know I need until atleast December.
Flag Wed Oct 30, 2013
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