How soon can I get a mortgage after paying off a repo? – Samantha

My car was repossessed in June 2010 and auctioned for less than the loan amount shortly after. So the account appears on my credit reports as a charge-off and delinquent for the deficiency amount. I would really like ti buy a home so six months ago I started working to repair my credit (which also had an old cellphone bill in collections and high 99% debt-limit ratio on 2 credit cards) I’ve paid off the cellphone bill, gotten a secured credit card and lowered my debt-limit ratio to about 25%.

My credit scores went from low 500’s to 680-660 range in about six months.

The bank that repo’d the car has now offered me a debt settlement for 40% of the $8,000 balance. They will then note the account at “settled charge-off” They never sent the account to a collection agency so I am dealing with the bank directly. My question is: will I ever be able to get a mortgage with a recent debt settlement? I can afford the lump sum if I empty my savings. Alternatively, if I negotiate a 6month payment plan with the bank to pay the full amount so that the account is listed as “paid/satisfied” what is the marginal benefit vs paying less in one lump sum but having a settled charge off? Would that be better or dies it nit matter since the account has been delinquent for a year and a half.

Thank you!

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3 thoughts on “How soon can I get a mortgage after paying off a repo? – Samantha”

  1. Samantha,

    My experience suggests it would not matter whether you paid the full deficiency over 6 months or settled now and realized the savings. The repo/charge off will likely still be there.

    Given your DTI and credit score referenced you could likely qualify for FHA loan underwriting today.

    If you settle for the 4k and continue to save and can put 5% down on a home, I like your chances for ownership in 2012.

    Be sure to get all of the settlement terms in writing prior to remitting any payment.

    Best of Success to you in the new year!

    Reply
    • Hi Michael,

      Thank you so much for replying. I think that was what I was leaning toward
      (settling and saving rest since I pretty much live payhcheck to paycheck) but it
      helps to read someone else’s opinion for a bit of assurance that my logic isnt
      too wacky.

       

      Believe it or not I had actually never looked at FHA loans. I was too
      busy dreaming about conventional mortgages with big banks. This is a whole
      new window for me so after some googling my plan is to sign up for a local free
      HUD pre-purchase class. I hope I can learn enough to make this lifetime dream
      happen. Thanks again for the information!

      Reply

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