Home Buying in Racine>Question Details

Ajnorris08, Home Buyer in Racine, WI

Will we pass the manual FHA underwriters?

Asked by Ajnorris08, Racine, WI Fri Nov 26, 2010

My husband and I are going for an FHA loan and we have been approved by the FHA desktop underwriter. However, the loan officer is concerned about an old unpaid collection account on my husband's credit report from a vehicle repossession. I should mention that my husband filed bankruptcy in 2002 and the repo happened afterwards. I also filed in 2007. We both have reestablished our credit and our scores are anywhere from 660 and up. Should we be worried about that old collection? And if there is a problem with it, would it help to pay it off?

Help the community by answering this question:


You need to speak to the lender.......the underwriters will more than likely require a written response for an questions they come across. Your lender should be able to direct you in the direction needed to confirm your financing. If you are not working with a professional LOCAL lender I highly suggested you do.

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1 vote Thank Flag Link Mon Nov 29, 2010
This is a tough call. Generally when someone declares bankcruptcy, they look for well established credit afterwards. Does he have an explanation for having a repo after a bankcruptcy, and how long afterwards was it? Seeing as you have had issues before, whether they approve you or not, you should take a hard look at what you are doing, and make sure that you feel comfortable with the payments you will have, and your debt ratio. There are times that desktop underwriting will approve a ratio up to 55%, but after having taxes, social security, possibly insurance and other things deducted, you are not left with that much to pay your other bills and buy food. I would say that if your debt ratio is relatively low, let's say a total of 38% including the new payment, you should be fine. That is the old fashioned ratio, and it's possible that we never should have gotten away from that. Even if you put a minimum amount down, you are paying off principal with every payment, and you wouldn't want to lose any of that if you couldn't make your payments.
1 vote Thank Flag Link Fri Nov 26, 2010
We are in the preapproval status right now and the "condition" (if that's what you want to call it) is that the collection be paid off, which we are doing. Does this pretty much guarantee us or do we still run the chance of being denied when we actually do a bank application?
0 votes Thank Flag Link Mon Nov 29, 2010
Donna & Jon, I am only giving her advice, I don't do loans in Wisconsin, so it really isn't necessary to say a LOCAL lender.
Aj, I would suggest writing up a letter explaining the bankruptcy, the repo, and your bankcruptcy, and include what you have done to assure that you are handling your debt in a more responsible manner now. Have you applied for a loan yet? I assume so from what you have said.
0 votes Thank Flag Link Mon Nov 29, 2010
the reason for the repo was because he had lost his job and had a job that paid much less than what he was making at the time of the original purchase. Over the last 3 years we have worked really hard to clean up his credit and have established good payment history as well.
0 votes Thank Flag Link Fri Nov 26, 2010
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