maharajamd

iTrader: (1)

I'm going to do this quick list style....

• Apartment lease ends in July (60 day lead notice of departure req)
• We want to buy a home
• I make 2/3 the money, my credit is so-so (625ish *guess*), I've got a nagging $80 debt that I've been trying to take care off (they are being bitches about removing it from the report)
• I've been maxing the hell out of my credit, then immediately paying it off for a long while now
• Her credit is damn near perfect (800s)
• 10 more months and we both own our cars (18 month early on hers? 12 on mine?)
• We've saved up a good bit of cash for a down payment, but we won't be able to hit 20% of the homes we are looking at...
• Parents will loan us money, interest free, no scheduled payback, to get to 20% dp
• Haste is getting to be a requirement

My questions are...

1. Do I resolve the stupid, unknown, $80 debt before pre-approval?
2. Do we obtain the "gift" loan from the parents before pre-approval?
3. What's the best way to handle that transfer to avoid taxes, etc? Say it will be somewhere around $25k...

I'll thank all of those ahead of time who are far more knowledgeable then I...

Sarlacc

Yes...get your credit fixed first. Thats huge...especially in todays economy.

maharajamd

iTrader: (1)

That's kind of the point. This little $80 came unknowingly to me. I took a huge step forward in my credit a few years ago and paid off all of my past issues. It stopped me from boosting one summer, the engagement ring did the next.

So, will it make that big of difference taking care of that $80 before preapproval? What if I can't get that resolved before we MUST start looking?

Sarlacc

If you don't get it resolved it will make it difficult to impossible to get approved.

doopstr

That $80 could prevent you from closing. When I applied for my first mortgage I had an unpaid telephone bill on there from my college days. I had to pay it and get a letter from the telephone company that stated the debt was paid. I was told that the lender would not close without it and I think the bill was only about $120.

Consider receiving the gift now. Your lender will want to see 3 months of bank statements and if an unexplained large amount shows up on one of your statements then you will need to explain that. I believe the tax free limit on gifts is $13k so if your mom/pop each give you $13k then they shouldn't need to pay tax on it. Verify that figure though.

maharajamd

iTrader: (1)

Ok well the debt issue is in motion I just wasn't sure about the time frame.

The $13k each sounds right to me. That's what I've been reading.

NSXNEXT

iTrader: (2)

That was a big mistake. Mortgage companies are going to look at your credit utilization. Maxing out credit cards (even if you pay them off each month) is a huge nono.

maharajamd

iTrader: (1)

Yea well there is a point where you do what you have to do to get you score up. This is over the past 3-4 years now.

maharajamd

iTrader: (1)

Another question I have then...

I had always been told to handle debt resolutions like that via certified mail. But time is a problem now. Should I call and take care of that debt, or keep waiting on snail mail?

JaredGMS

Still a no no. Any utilization of revolving credit more than 30% of your limit on ANY one card actually hurts your score. Keep your balance under 30% at all times for the most beneficial increases.

alex2364

Stop maxing out your card and use no more than 50% of your available credit. Ask your credit card company for an increase to your limit if you have to.

maharajamd

iTrader: (1)

Well let me rephrase then...

When I first got a credit card (VISA) the limit was very very low. I maxed it out for 5 months and paid it off when I got the bill. Which they said to do actually. Just buying things like gas, food, etc. Eventually my credit line quadrupled. Since then I can't even come close to "maxing" it. I use probably 25% of my credit card limit each month and pay it off each month. This, however, was only a couple years ago now. Yea, I made it to 26 without having a true credit card. Which was dumb...anyways...

My only other credit is a Bestbuy card. I had this card way before the Visa. The limit is also double what the Cap One is now. I have probably maxed that card out 3 times in the past 4-5 years, big purchases. Being so big I didn't pay it off immediately. I would generally just divide the total by half the term period. So, 3 years no interest I pay it off in 18 months. My credit line grew there by a lot as well.

I hope that makes more sense.

Edit: I was in a rush and mobile when I made the first post. I probably should have explained things better.

Will Y.

Good; that helps. Keep utilization under even 30%.

I agree with everyone else: clear that $80 debt, as that's probably lowered your credit score quite a bit by itself, in addition to being a likely impediment to closing any escrow.

maharajamd

iTrader: (1)

Well as a credit newb I have to say that I think this system is incredibly flawed and ridiculous.

Me, never needed credit, and in my entire life (sans car and college) have only ever owed maybe $3k at one moment in time. I make great money. And I get fucked. Friend, two bankruptcies, owes thousands and thousands, makes half what I do, and can make out like a bandit with lenders.

So I'll ask again, should i CALL the people to take care of that tiny $80 or do I continue to wait for snail mail? I mean I've got like 45 days now until we have to put in writing whether we are staying at our apt or not.

Sarlacc

Well...yeah.

These credit companies cater towards the people who keep and accrue debt because that is where they make their money.

maharajamd

iTrader: (1)

Ok I've got an update here and some more questions.

I have gotten nothing back from the Credit Protection Association about that $80 collection. Point in fact, that single $80 collection is listed twice on my credit reports for some unknown reason. I've sent them countless letters, signature required, and haven't heard a word. I've been hesitant to call them as people advise against that.

So I call the original creditor (Time Warner) and they had nothing either. But they told me to call the local branch from where I lived during the time of this "bill". I lived in Cincinnati in 2006. Both of the entries are listed to roll off in August of this year btw.

I called TW Cinci and they were actually able to find the account "in the archives". There is only one unpaid fee, $80, and it was for the last month of service. A bill that I never got. And yes, I took all the proper procedures when moving. Anyways, I paid it. I hope that wasn't a wrong move. She said it will take 3-6 weeks for it to go through their system and for the CA to be notified.

The CA are the ones who reported it to the bureaus. And they did it twice.

• Anyone know why there would be duplicates?
• Can at *LEAST* one of the duplicates be removed?
• Has the incorrect duplicate been fcking my credit more then one would have? What's my recourse if so?
• What is my angle with the CA? Now that they can see it's been paid to the OC, will/can they actually delete the entries from my credit reports?

maharajamd

iTrader: (1)

And now I see that collections under $100 don't really affect your credit score under the new FICO formulas...

maharajamd

iTrader: (1)

Update #3 today...

So I called the CA on the way home. I figured I've got nothing to loose at this point because I've already paid the OC.

Get on the line, told my story, immediately moved up to a supervisor. Tell her my story and she has no idea why there are two entries for the same thing.

She said "is that all I can do for you today?"

"No", I replied, "I've had TWO negative entries on my credit for no reason for 6+ years! You've never once tried to contact me. It took every personal piece of info just for you to find my account. And it's your fault. So what are you going to do to make amends?".

She told me she will pass this up the chain and once they get confirmation of payment from the OC, they will delete the entries entirely.

Winning.

Granted, what they say on the phone and what they do are completely different. But I like my chances at this point much better then I did 6 hours ago.

Edit: Where's Sarlacc when I need him. Lol

Sarlacc

I sensed something...

You rang?

Sarlacc

Not sure what your recourse would be...

What I would be doing is calling them everyday making sure its being taken care of. If you call tomorrow and have to start all over again with your story...well, start writing down names.

I dealt with a doctors office sending my wife to collections while my wife was in the middle of trying to work out the false charges.

I took over after that. I ripped the billing woman responsible to shreds. I made notes of every phone call, time of day what was discussed, and their names. Took about a week of knocking heads but I finally broke through nailed them, and made them contact and take care of the Collection Agency...and I made them do it ASAP. Then, I followed with the agency to make sure it was gone.

I dont screw with my finances, I don't if I annoy the holy hell of people, I get it taken care of ASAP.

MR1

It would be a good idea to get with a lender to see what you can qualify for. They will help you solve any issues that you have.

maharajamd

iTrader: (1)

Well I really wanted this one last little thing to be taken care of before I started talking to the lenders. But I guess I've already got proof and confirmation from the OC so I might as well call. I think all they care about is that it is taken care of.

I wish I had some idea of how bad the $80 has been hurting me. Or how much two has been. I guess under the FICO 08 formula collections under $100 doesn't hardly hurt your score. We'll see.

Jiggy2dmax

iTrader: (1)

Good to hear you have some resolution. I've started the process of looking to purchase my 1st home also and it hasn't been as bad as initially thought it would be.

I ran through the pre-approval process with 3 banks and every single one of them were way more interested in my debt to income ratio as opposed to my credit score. I'm sure a great score helps, which I do have but I don't think the banks are solely basing their practices on that nowadays so it may not be hurting you as much as you may think. Best of luck and let us know how it goes.

TheChamp531

iTrader: (3)

Damn wish I only owed $80. I owe about $8k in credit cards, loans, and collections. I made some bad decisions awhile back. I use to have a decent 7xx FICO, now I'm like at 5xx. Wonder if I could reach a settlement for cheaper to settle all of it (~4k)

winstrolvtec

The first thing is don't rush it. See if you can continue your lease on a month to month basis if need be. You should take care of that $80 ding, go in looking as good as possible.

20% down is not a neccesity if you don't mind paying a little more per month as well as mortgage insurance and with your credit standing, these programs will make it easier for you to qualify, plus they have higher DTI allowances. You can get an FHA with 3.5% down and as low a score as 560, even 500 with 10% down instead. There are some others like this as well.

DTI and credit history are more important than your score. It's for that reason you should also get the car payments down to 10 or less monthly installments remaining (assuming they are finances and not leases), this way most banks/lenders will not include them in your DTI ratio.

The transfer of gift funds is not actually required for the pre-approval, just proof of the assests, account statements and so forth, preferably not cash laying around though. Depending on how much it is, a gift tax form may not even need to be filed by the donor(s). Up to $13k gifted by an individual and up to $26k for a married couple are exempt.

Even if you exceed that, the donors in this case would not pay anything in additional taxes until they exceed their lifetime limits which are a little over 5 million each. Although there may be taxes depending on where the money is coming from but that's not related to gift tax. Unless you are in CT or TN then you don't have to worry about a state level gift tax, just the Fed.

maharajamd

iTrader: (1)

^Great info man. Thanks.

Coincidentally we have less then 10 payments on each of our vehicles. So I guess that's going to be a good thing for us.

We signed a month to month contract at our apartment. That starts in August.

I will be calling for per-approval early next week! I'm not waiting for the CA any longer.

maharajamd

iTrader: (1)

Just to follow up and close...

I sorted everything out and sent in for pre-approval this week.

We are approved! 3.5%!

Now we have 2-3 months to find a house!

winstrolvtec

^Congrats, excellent rate and it's a great time to buy. Let us know if you have any questions about the process. Best of luck.