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After all that, I can't get a mortgage.

by Lisa Gergets
24 replies
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This isn't going to be a rainbows & unicorns post, and I'm sorry. I have nowhere to go with this so, it goes here.

Since November, when hubs and I decided we wanted to move, I've been working with a credit-repair agency. Since then, I've been able to raise my score over 100 points to the level where I actually would qualify for a mortgage. It's been slow going and frustrating because the credit agencies don't want to deal with this stuff. But, we got there.

In November of 2008, I filed bankruptcy to avoid a wage garnishment due to a car accident...it's a long story. Anyways, there was this $4000 judgement and I couldn't afford a wage garnishment, so I filled Chapter 7 to wipe it out. I didn't have huge credit debt or anything...

Now, back in October of 2009, one of my two credit cards showed a late payment that was in error. (I have two credit cards with very low limits and I pay them every month at the same time. I know I paid both because I paid one, kwim?) Since we realized it was showing late, my credit repair guy has been contesting it, trying to get it removed.

I need my current job to get a mortgage, so I'm stuck here until I get approved. I make more than most associate attorneys do here in Chicago, but I couldn't get approved for a mortgage because, with the bankruptcy, the lender won't accept any derogatory credit issues that happened after the bankruptcy.

So I've done all of this...and still got denied for a mortgage because of that one supposedly late payment.

I am just devastated. Of course, I'm discussing this all with my credit guy and my lender guy...but ya know? I work really hard. I want to give my family (mostly my son, who is autistic) a good life...a place out in the country where we don't have to worry about the shooting down the block and where we don't have to be afraid to be outside at night. A place to look up and see stars. That's all I really want.

And one late payment....man, I am just so deflated.

OK, I'm done.
  • Profile picture of the author Ken Strong
    Sent you a PM. You don't need to give up yet.
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  • Profile picture of the author Mr. Enthusiastic
    Lisa, I worked for a while in the software area of a major mortgage company. I didn't originate loans, but I did get very familiar with the official loan program guides.

    There's almost certainly a mortgage available for you. It might have high fees, a high rate, and a high down payment. It might also require using some of the loan proceeds to pay off your old debts at closing.

    And it will probably require working with a mortgage broker (someone who represents multiple lenders, not just one), in order to find the relevant program. A broker should be able to get the underwriting guidelines, or work with someone on the inside of the bank, to find out if you have good chances before you apply.

    After a year or two on the mediocre mortgage, consistent payments will look good on your credit report. Then you can move over to a prime loan with more favorable terms.

    As for a place in the country, that might be harder to get appraised unless it has a standard house on it. If you can find a place in the country with an adequate house, maybe you could get the loan, then sell the house to someone who moves it offsite, and put a new manufactured home on the land. This way you'd probably wind up ahead financially, and also have a warranty on the building.

    The thing that concerns me is that you only mentioned working with one lender. There should be at least one broker involved, so you get to choose from a broader range of loan programs from multiple lenders.

    You're still on your own to find the unicorns. Maybe, if you're lucky, they'll like to stroll out and watch the shooting stars with your family.

    Chris
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    • Profile picture of the author Ken Strong
      Originally Posted by Mr. Enthusiastic View Post

      There's almost certainly a mortgage available for you. It might have high fees, a high rate, and a high down payment. It might also require using some of the loan proceeds to pay off your old debts at closing.
      She said the only problem was an erroneous item on her credit report about a late payment that wasn't actually late -- why should she settle for paying who knows how many extra thousands of dollars over the next several decades when she's in the right?

      The more-expensive mortgage should be an absolute last resort -- I don't think all avenues of fighting the wrong entry on the credit report have been exhausted yet.
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  • Profile picture of the author Mr. Enthusiastic
    Ken, you're right. A good mortgage broker should be able to help with the credit cleanup, too.

    However, if the credit problems continue, a bad mortgage just might be better than no mortgage.
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  • Profile picture of the author KimW
    Renting is like taking your money and flushing it down the toilet.
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    • Profile picture of the author whateverpedia
      Originally Posted by KimW View Post

      Renting is like taking your money and flushing it down the toilet.
      The interest and fees you pay to the bank is money flushed down the toilet.
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      • Profile picture of the author dorim
        Originally Posted by whateverpedia View Post

        The interest and fees you pay to the bank is money flushed down the toilet.
        My house is paid in full, I no longer pay interest and fees to the bank; I am grateful for those 20 years of paying interest and fees to the bank for now I own a home that is worth 3 times what I paid for it in 1988 and all I pay now are real estate taxes and homeowners insurance. I have a well and septic system so no water or sewer bills. If I rented a place instead of buying I would have nothing now.
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      • Profile picture of the author KimW
        Originally Posted by whateverpedia View Post

        The interest and fees you pay to the bank is money flushed down the toilet.
        If your talking about when you buy, your getting into a political discussion,and thats not allowed,but as dorim posted, she now OWNs after buying,and if she had rented she would have nothing.

        I bought my first house in 1979 for 25K. ( I know, a new car cost more than my first house did!).
        I sold it in 1997 for about 85K. And now I kick myself in my ass,I should have finished paying it off and rented it out.

        If I had kept it,in 2007 when my 30 year mortgage would have been paid off,the house was worth about 250k.

        As it is, I made about 50k when I sold it, if I had rented I would have made zero k.

        Lisa,
        You might want to approach the owner you want to buy from with a rent to own offer. I'm not going into the details here,but sometimes thats a way to get into the palce you want until your credit is good enough to satisfy the lenders, and it gets the seller income coming in right away,and a sale down the road.
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  • Profile picture of the author Lisa Gergets
    The credit repair agency that I've been working with is the only reason I've been able to raise my credit to the level where I could even try to get a mortgage. They've been worth their weight in gold to me, and I now have them as an offline client to boot. Not all credit repair agencies are bad.

    I am aware that the bankruptcy had a negative affect on my credit...the bankruptcy isn't what the lender has an issue with. It's the late payment (coupled with the bankruptcy) that they are having a problem with.

    We can't rent a farm, and that's what we want. That's our whole point of moving.

    The lender I'm working with is a mortgage broker. I have contacted several lenders and brokers and this lender is the only one that said the bankruptcy didn't have to be aged at least 18 months.
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    • Profile picture of the author Kay King
      I think she's saying there are no "farms" for rent - to rent something it must be available for rent and places in the country are not usually rentals.

      I'm surprised any lender would consider a mortgage less than 18-24 months after a chapter 7 in this current credit market.

      If the credit card payment wasn't late the credit lender should acknowledge that. It shouldn't be hard to prove. Most credit repair companies contact the credit bureau to require re-verifications rather than contacting the credit card lender to dispute the claim. If the lender has it listed as "late" they will re-verify the "late" to the credit bureau for at least a year in most cases. You've probably done this - but have you talked to the credit card company directly about the "late" claim?

      If the lender refuses to change the "late" designation you will have to wait a few months perhaps. If that happens, take the time to prepare for a mortgage by paying off those credit accounts and piling up the largest cash down payment you can put together. More down payment gives you more leverage as it poses less risk for the lender.

      More cash in the bank accounts also is something that appeals to mortgage underwriters now, too.

      This may slow you down but it won't stop you. Good luck.

      kay
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  • Profile picture of the author Lisa Gergets
    We're renting now, yes. And I can't leave because I need my current job in order to qualify for a mortgage. Self-employeds need two years income statements to qualify and I won't have that for another year.

    Worse come to worst, we'll just have to extend our timeline a bit.
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  • Profile picture of the author Lisa Gergets
    We truly believe that we will end up where we're supposed to end up, when we're supposed to end up there. If not now, there's a reason.
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    • Profile picture of the author Kay King
      You are absolutely right! You'll get there.
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  • Profile picture of the author KimW
    "Renting is a great way of living when you don't have any desire or intention of buying a place."

    Maybe so Nathan, but she has already said that she wants and desires to buy a place...............
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  • Profile picture of the author KimW
    "I'm surprised any lender would consider a mortgage less than 18-24 months after a chapter 7 in this current credit market"

    Kay,
    there are many lenders whose sole market are those trying to recover from bankruptcy.Just like with credit cards, you pay a higher cost for it though.
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  • Profile picture of the author Mr. Enthusiastic
    If the farm might come from a private party seller, is there any chance they might be willing to do a 2 year lease with an option to buy? (You might need to let the option price vary according to an appraisal at time of closing, in order for a lender to accept it.) Another possibility would be for the seller to refinance for whatever cash they need up front, then you could buy directly from them on contract terms. They keep title until you've paid in full, and could kick you out if you're late paying, but you get to live there immediately.

    Given the slow real estate market, there might be someone with land who'd rather have a good tenant than a tax bill on an empty property.

    Are you regularly visiting the countryside? 4H, schools, churches, Main St. in town, etc.? Telling people it's where you want to move, and why? Letting them know that you're a freelance writer (they might not get "Internet marketer") who can work from home, but the bank might not finance you until you have next year's tax returns, but you want to start meeting people now? Sometimes if you ask for advice about money, you get a break financially you never could have asked for.
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  • Profile picture of the author Lisa Gergets
    Come on guys, this isn't a debate on rent vs. buy. We want to buy. We've always rented. You can't rent a farm and do what we want to do. Period.

    I'm going to really start playing hardball with both the credit and lender dudes. The lender (mortgage broker) keeps putting carrots in front of me and when I reach it and eat it up, he puts out another carrot. Frankly, yesterday I was licking my wounds, but today I'm solidly pissed about it.

    We're also exploring the owner-financing thing. This type of lending scenario is much more common in the south than the north, so we'll see what we come up with.

    Visiting the area to get the word out that we're looking for property is a brilliant idea and one we hadn't thought of. We'll definitely be looking at that...
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    • Profile picture of the author Mr. Enthusiastic
      Originally Posted by Lisa Gergets View Post

      The lender (mortgage broker) keeps putting carrots in front of me and when I reach it and eat it up, he puts out another carrot. Frankly, yesterday I was licking my wounds, but today I'm solidly pissed about it.
      I think you're right to challenge him on that. If you're at step 12 of 25, that's OK but he has to show you that there is a 25-step plan and not just one carrot after another.

      Visiting the area to get the word out that we're looking for property is a brilliant idea and one we hadn't thought of. We'll definitely be looking at that...
      Even if you don't find a property that way, it should at least give your family some happy time together out in the country.
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  • Profile picture of the author Lisa Gergets
    Well, I've been talking to my credit-repair guy and he is of the opinion that this will all be able to be taken care of by the deadline for the tax rebate, which is April 30th. So, all is not lost. In the meantime, I sent this to the lender this morning:
    After yesterday's bad news, I feel I need to express my dissatisfaction. I had fully expected you to come back and say that my application got denied and that we needed to get the collection paid off and removed, and then write a letter regarding the late payments to my credit card. What I did not expect was to have you come back and change the purported requirements yet again.

    It seems as if every time I talk to you, there is another hoop to jump through. First you told me that the underwriters would waive the aged bankruptcy requirement if I could get my scores to 620. When I got my scores to 620, you said that there should be no derogatories after the bankruptcy but that your underwriters would accept one derogatory if a letter of explanation accompanied it. Now, you're saying there can be no derogatories at all. Every single time I reach the point you've led me to, you put out another carrot. I'm just wondering if this is just your MO, because frankly, it sucks. It would just seem that if there are specific requirements that the underwriters need to have met, they wouldn't be constantly changing, and that it would be much more fair to me as a customer to have had this all laid out for me from the beginning.

    I knew there would be challenges...but thinking that I've finally gotten there only to have you tell me that I haven't (for the third time now) is getting very old.
    He still hasn't responded, but he's kind of a weenie, and I didn't really expect that he would. Looking for a new mortgage broker as we speak.
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