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Old 02-05-2013, 09:35 AM
 
8 posts, read 21,122 times
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I am hoping someone can help me out with this one and let me know how this may impact my ability to qualify for a mortgage. We had a short sale on our previous home which closed in June 2010. In order to close the sale we were required to sign a $10k note with Freddie Mac which was ultimately purchased by Dyck O'Neal. We are now in a position where we would like to purchase another home and are able to put 20% down, have ample income, stable employment, etc.

In order to help clean up our outstanding credit issues related to the short sale (or at least was my intent) I recently settled the remaining balance of the note with Dyck O'Neal. While I thought this was the right thing to do it has unfortunately left us with a derogatory remark of "settled for less than full balance" on our credit report and reduced our score from about 685 to 640, despite having a two year history of on-time payments reported prior to the settlement. We have had no other derogatory remarks for over 1 year and I had thought we were finally in a great position to buy again but now I am worried this recent settlement with Dyck O'Neal may have backfired.

Do any of the mortgage experts out there have any insight into whether this will create a challenge in obtaining a mortgage approval either due to the mark itself or the fact that it reduced our score below the important 680 mark. Is there anything I can do to quickly remedy this situation in the next month or two????

I appreciate your feedback!
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Old 02-06-2013, 04:54 PM
 
3,317 posts, read 7,251,326 times
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Depends. You can qualify for FHA, VA or USDA with the 640. If you are going with a conventional loan, the 640 qualifies you, but terms will be worse and more down payment may be required. For instance, usually you cannot go Conventional with only 5% down with a 640. Your mileage may vary bank-to-bank.

The rest of your credit report holds potential opportunities to pop your scores back up. Do you have credit cards that have balances over 50-60% of the max available balance? Pay them down, and your mortgage person should be able to update your credit in 3-4 days.

The question is: Is that $10k technically a mortgage account, on which you now have a RECENT settlement? That would be a major problem. If it's just an installment account, then the issue can be mitigated with a little financial elbow grease.
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Old 02-06-2013, 05:20 PM
 
8 posts, read 21,122 times
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The not is NOT showing up as a mortgage but rather as an unsecured installment loan. In addition, all payments made prior to the settlement posting are showing paid on time so I'm hoping this will help mitigate the issue. I am planning to pay down my CC debt in hopes that that will also raise my score and we are already planning to put down 20%. Income and time on job are both very good as well so I'm hoping we will still be in the clear. Biggest worry right now is the credit score.

The sad part is when I settled the debt I only ended up paying over 75% of the total note balance and had no idea it would result in a derogatory posting on my credit. Had I known that I would have paid it off in full or just kept it open but I thought I was doing the right thing by settling the issue. I'm going to approach them about possibly changing how it is reported but I'm not optimistic as they have been difficult to work with. I'd even be willing to pay the remaining balance from the note to change the reporting but I suspect this is no longer an option as it has been legally settled and remaining debt already written off. Anyone have any other advise on how to manage this?
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Old 02-06-2013, 05:22 PM
 
8 posts, read 21,122 times
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Also, due to the short sale I do not yet qualify for a FHA loan right? I believe that requires a 3 year waiting period and we are only at 2.5 years. I believe I must do a conventional loan with 20% down.
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Old 02-06-2013, 05:38 PM
 
3,576 posts, read 5,902,769 times
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Quote:
Originally Posted by Aharmon499 View Post
Also, due to the short sale I do not yet qualify for a FHA loan right? I believe that requires a 3 year waiting period and we are only at 2.5 years. I believe I must do a conventional loan with 20% down.
Depends. If you didn't miss any mortgage payments there aren't any waiting period at all. If you missed payments its 3 years now.
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