Obviously, somewhere in time, someone told someone who told someone that this was the case and it became common belief.  But, is it true?  To answer this question, we must first look to the origins of the belief.

The culprit: FHA Mortgages!

The FHA has long stated that credit scores do not matter to them.  They are interested in a person’s credit profile, but not the number which they view as arbitrary.  They still hold to this perspective today, but only as their official position.  It is believed that behind closed doors they have told the lending institutions that originate and purchase the loans to be insured by the FHA that the portfolio is suffering due to the low credit score borrowers that have been granted loans and if FHA is to survive, the lending institutions will have to create their own minimum score.  Most of them, if not all of them, did: 620.  What does this have to do with medical collections, you ask.  Well, FHA typically required lenders to make the borrowers pay off collections in order to qualify for an FHA loan, however, medical collections were usually exempt.  So, what you had going around the general public was the idea that medical collections didn’t matter.  And as far as FHA mortgages were concerned, they didn’t.  But, do they effect a credit score?  The answer to that is simple: Any collection on your credit report will have an effect on your score.  Your score will be lowered by collections for an unpaid credit card bill, an unpaid utility bill and yes, an unpaid medical bill as well.

And now for the double whammy! Click Here

While folks have always faced hurdles because of poor credit, they always had FHA as a source of home loans as long as they could keep their credit clean for a year, even if they had medical collections show up during that year prior to applying.  They weren’t asked to pay the medicals and you still most likely would not be required to pay them off today if you were applying for an FHA loan.  However, as stated earlier, to get an FHA loan today, you need a 620 FICO score.  So, if you have a dozen medical collections, you probably don’t have a 620 or higher.

So, yes, medical collections do hurt your credit and always have.  And now, because they hurt your credit score, they also hurt your chances to get even an FHA loan.  So, do your best to pay your medical bills before they get sent to collections.  you’ll be glad you did when you sit down to apply for a mortgage, credit card and even insurance!

–Call me if you are unsure what your credit is like and are interested in buying a home or refinancing.  I also can refer clients to a great credit repair company if needed.  810-606-1000.

1) The best appraiser for the job likely doesn’t get it because the loan officer didn’t pick one that he or she knows is the best. I pick appraisers based on who currently has a good turn time, who knows the area, who charges a reasonable fee and who I know to be competent and on the ball.  With the HVCC, the appraiser is chose at random.

2) Quality suffers.  The 3rd party appraisal management company, or AMC, tries to regulate turn times and cost.  To be approved with the AMC, an appraiser has to agree to abide by the regulations the AMC sets forth.  Some appraisals require much more research than average. But, the appraiser may not have enough time to do their best if they are up against the deadline set forth by the AMC.  Also, if the AMC sets low appraisal prices and takes their share and gives the appraiser half of what he used to make, he’ll have to do double the amount he used to do to earn the same money.  So, he’ll have to rush them through which will cause the quality to suffer.

3) Multiple Appraisals from multiple AMCs. Most lenders have aligned with one AMC or another and perhaps have aligned with 2.  So, what happens if your appraisal is done and for some reason your loan is denied?  What if the bank ceases operations while your loan is in progress and won’t close it like what recently happened with lender Taylor Bean & Whitaker? Well, your loan officer takes your application somewhere else. But, that lender most likely has a different AMC that they use.  So, you may have to get new appraisal and with every new appraisal comes a new bill.

There are a multitude of other problems this has caused.  Another big one (I know I said only 3) is that appraisers who have worked to build relationships for years have been forced down to an even plane with part time appraisers and newbies.  Bottom line – it stinks.

The best thing to avoid this is to get an FHA loan or a Rural Development loan. With FHA you only need 3.5% down and with Rural Development, you can get in for $0 down.  With Conventional, you need 10% down, but if you have a chunk of money you want to put down, conventional may be best for you on paper and you may have to bite the HVCC bullet.  As always, consult a professional mortgage consultant to help you make the best choice for your situation.  Luckily for you, I am one such consultant.  Give me a call with any questions!

Listen, there are great real estate deals out there and with the tax credit you get an additional 10% back if you have not owned a home in the last 3 years.  It’s like buying a $500 laptop at Staples.com and getting a check for $50 back in 30 days, only you get a check back for $8,000!  When it’s over, you get to hit the red button and it’ll say “That was easy!”

The problem folks are going to run into is that underwriting is going to get way behind as there will be a rush to close by the deadline of November 30.  My suggestion is that you set a goal to have a purchase agreement agreed upon by September 30.  60 days is more than enough time to close on a home, but you never know.  Play it safe!

If you qualify, don’t wait, get in line and find that dream house.  If you aren’t sure if you can get a mortgage, what’s it hurt to try.  Call me at 810-606-1000 and we’ll do a quick phone consultation and you will know in no time!  Don’t delay or you may miss the opportunity of a lifetime!