Charge Off Mortgage Solutions
You can buy a home with an old charge off on your credit
Often a buyer may have gone through a period where there was a drop in income, took a while to find a job out of school, had a medical emergency, a divorce, or just didn’t understand credit. Periods like this can cause credit issues such as a charge off. A charge off is when a creditor reports the debt as not collectible because it got behind so far. A charge off may have a balance remaining or it may just show as a zero balance charge off. This is a major credit issue, but if a buyer can re-establish credit and we can prove compensating factors, buying a home is possible with VA and FHA!
Check out this FHA Purchase Success where there was an open charge off
This buyer came to us a few months ago with the following issues on credit and after we counseled him on his credit & documented the file very well, we were able to present a great file to underwriting for approval.
- charged off car loan over 2 years old with a $7000 balance
- $1000 in open collections
- no new accounts reporting over 12 months
- Credit score went from just over 600 to 649 after credit recommendations we made
- 32% housing ratio and 42% total debt ratio
- Needed a low down payment mortgage loan
- Proved 20 months of on-time rent
- Documented alternative credit including on time cable tv and an electric bill
- Documented the borrower’s own funds for down payment
- Proved the reasons for the previous credit issues
- Used an FHA loan to meet the requirements of this scenario and give the buyer what he needed
The end result is the borrower is a proud new home owner that has a payment in the range that he is comfortable with, the agents have another sale, the seller is able to buy another home, and the neighborhood has another great neighbor! This is why we love the mortgage business and how it helps the economy. We are so happy to be able to help buyers that have experienced issues in the past but have worked hard to overcome it and become a homeowner.
VA home loans can allow an open charge off
We recently had a Veteran that applied for a no down payment, VA home loan with some previous issues. This Veteran had experienced a charge off back in 2011 plus some minor collections and had the following circumstances to overcome:
- Open charge off of $3700 from 2011
- $500 in open collections
- Not currently renting
- 648 credit score
- No down payment
This sounds tough, right? Well we were able to document the file very well with the buyer’s help and were able to close this loan by doing the following:
- Proved re-established credit history with 3 accounts on credit reporting 19 – 29 months on-time
- 12 months of rent history paid on time on her prior residence from a few months before
- No payment shock – her new house payment is the same as the prior rent payment
- Had a low debt ratio of only 29% total
- 3 months of asset reserves
We love to help buyers and families achieve the goal of homeownership. Not all loans are perfect and we understand that. If you have a situation that has happened in the past, but have re-established good credit since, call us. If we can’t approve your loan now, we will provide suggestions for you in order to qualify in the near future.
- Limited credit and how to be prepared up-front for a successful purchase
- Little known VA quirks that can get you into a house
Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.