Real Estate

Mortgage with a couple of Small Collections

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  • Jul 28th, 2020 12:21 am
[OP]
Newbie
Jul 22, 2020
2 posts

Mortgage with a couple of Small Collections

So I just want to try and get a little bit of advice after getting some very conflicting advice from two Mortgage Brokers. My girlfriend and I are looking at buying a house and we didn't expect to have the complications that we are. We both have decent credit and income but we got conflicting advice on two points that I want to try to clear up.

For me, I have 3 tiny collections (Like $200 each from really dumb miscommunications). Two of them are 5 years old, one of them is about 2 years old. One of the mortgage brokers just said I need to pay them off and get proof that they're paid off, and didn't mention any other problems. The other one said that it will take 12 months from the date they are paid off before we can go with a decent lender, but that we could buy it now if we go with a B lender at around 3.5-4% and put 20% down.

Now just to clarify because I know people can be quick to judge. I know this isn't ideal, I have no problem repaying them, I had worked hard to rebuild my credit after a health crisis about 8 years ago and had been given (possibly bad) advice that paying them could reset the clock and hurt my credit. Two of them shouldn't even be there because I thought my insurance had already paid them, I would've just paid them had I known before they appeared on my credit report. So however the best way is to fix this I'm happy to work with it. My credit is otherwise no problems on it, my fico score shows around 690 right now so not perfect but within mortgage territory, I believe.

The other side of the coin is TDS, by our calculation, the banks would calculate it at 43-44%, GDS is about 23%. We can bring TDS down, most of it isn't really an issue and is gone in just over a year. How much we need to bring it down is where we got different advice. The one who had no problem with the collections gave a somewhat crazy number that didn't make sense. The other one gave a number that made perfect sense, but had issues with the collections.

So given this information, I can finally get to my concern. None of these issues are impossible to overcome, we can probably do the 20% down if we need to, but paying 3.5+% interest right now seems insane. Similarly, we could pay down the amount of debt that the other broker suggested but I'm not entirely convinced he's being completely forthcoming and won't just spring a similar rate on us. The goal is to pay things down anyways but how much and how fast is different.

Is it worth talking to another broker? My girlfriend's credit is better than mine, literally, the only negative on either of our credit scores are my collections, and even still my score is decent. Or are the collections going to be a kiss of death on interest rates for the next 12 months?

[Edit] Just to clarify as well the TDS and GDS numbers are with the estimated mortgage/heating/taxes included
8 replies
Deal Addict
Jul 3, 2002
1436 posts
3357 upvotes
TravelDev wrote: So I just want to try and get a little bit of advice after getting some very conflicting advice from two Mortgage Brokers. My girlfriend and I are looking at buying a house and we didn't expect to have the complications that we are. We both have decent credit and income but we got conflicting advice on two points that I want to try to clear up.

For me, I have 3 tiny collections (Like $200 each from really dumb miscommunications). Two of them are 5 years old, one of them is about 2 years old. One of the mortgage brokers just said I need to pay them off and get proof that they're paid off, and didn't mention any other problems. The other one said that it will take 12 months from the date they are paid off before we can go with a decent lender, but that we could buy it now if we go with a B lender at around 3.5-4% and put 20% down.

Now just to clarify because I know people can be quick to judge. I know this isn't ideal, I have no problem repaying them, I had worked hard to rebuild my credit after a health crisis about 8 years ago and had been given (possibly bad) advice that paying them could reset the clock and hurt my credit. Two of them shouldn't even be there because I thought my insurance had already paid them, I would've just paid them had I known before they appeared on my credit report. So however the best way is to fix this I'm happy to work with it. My credit is otherwise no problems on it, my fico score shows around 690 right now so not perfect but within mortgage territory, I believe.

The other side of the coin is TDS, by our calculation, the banks would calculate it at 43-44%, GDS is about 23%. We can bring TDS down, most of it isn't really an issue and is gone in just over a year. How much we need to bring it down is where we got different advice. The one who had no problem with the collections gave a somewhat crazy number that didn't make sense. The other one gave a number that made perfect sense, but had issues with the collections.

So given this information, I can finally get to my concern. None of these issues are impossible to overcome, we can probably do the 20% down if we need to, but paying 3.5+% interest right now seems insane. Similarly, we could pay down the amount of debt that the other broker suggested but I'm not entirely convinced he's being completely forthcoming and won't just spring a similar rate on us. The goal is to pay things down anyways but how much and how fast is different.

Is it worth talking to another broker? My girlfriend's credit is better than mine, literally, the only negative on either of our credit scores are my collections, and even still my score is decent. Or are the collections going to be a kiss of death on interest rates for the next 12 months?

[Edit] Just to clarify as well the TDS and GDS numbers are with the estimated mortgage/heating/taxes included
690 is not a good credit score
You will not get a bank mortgage with your credit history
If a broker says s/he can get a b lender to give you a mortgage, go for it at whatever rate they give you. You won't be getting a 2% mortgage with unpaid collections on your credit score period.
Get a third opinion from another broker
Member
Dec 12, 2011
203 posts
224 upvotes
Toronto
I'll give you advice as a former, collections officer pertaining to your small debt. Get it in writing that once you pay off the debt (by a specified time and date on letter) the account will be considered paid in full, and the collections office will send you a release letter stating that's it is paid off. Collections offices are well known for pulling the shadiest moves (encouraged by the company), even more so once they find out that you are trying to get a mortgage. Lots of times people will pay but the collections office doesn't close the account and doesn't send a release letter. Once the debtor finds out down the road that it is still on their credit report, they call in only to find out they still owe money. Collections officers call that dipping back into the well. Anyways, who is the debt with now? A collections office or original company? No matter what, do not let they know you are trying to get a mortgage. Call them up and offer to settle at a reduced amount.
[OP]
Newbie
Jul 22, 2020
2 posts
FARMERBLANCHE wrote: 690 is not a good credit score
You will not get a bank mortgage with your credit history
If a broker says s/he can get a b lender to give you a mortgage, go for it at whatever rate they give you. You won't be getting a 2% mortgage with unpaid collections on your credit score period.
Get a third opinion from another broker
I know I won't get a mortgage with unpaid collections. The concern was more how long after those collections are paid will it continue being an issue.
clydelee2020 wrote: I'll give you advice as a former, collections officer pertaining to your small debt. Get it in writing that once you pay off the debt (by a specified time and date on letter) the account will be considered paid in full, and the collections office will send you a release letter stating that's it is paid off. Collections offices are well known for pulling the shadiest moves (encouraged by the company), even more so once they find out that you are trying to get a mortgage. Lots of times people will pay but the collections office doesn't close the account and doesn't send a release letter. Once the debtor finds out down the road that it is still on their credit report, they call in only to find out they still owe money. Collections officers call that dipping back into the well. Anyways, who is the debt with now? A collections office or original company? No matter what, do not let they know you are trying to get a mortgage. Call them up and offer to settle at a reduced amount.
Thanks for the advice. I think it must be assigned to the collectors, my credit report shows both the name of the Dentists and Credit Bureau Services Canada as the collections agency. I'll make sure to get everything documented, and no definitely wouldn't give them that much leverage by telling them I wanted to get a mortgage.
Deal Guru
User avatar
Feb 2, 2014
10283 posts
2994 upvotes
Toronto
TravelDev wrote: So I just want to try and get a little bit of advice after getting some very conflicting advice from two Mortgage Brokers. My girlfriend and I are looking at buying a house and we didn't expect to have the complications that we are. We both have decent credit and income but we got conflicting advice on two points that I want to try to clear up.

For me, I have 3 tiny collections (Like $200 each from really dumb miscommunications). Two of them are 5 years old, one of them is about 2 years old. One of the mortgage brokers just said I need to pay them off and get proof that they're paid off, and didn't mention any other problems. The other one said that it will take 12 months from the date they are paid off before we can go with a decent lender, but that we could buy it now if we go with a B lender at around 3.5-4% and put 20% down.

Now just to clarify because I know people can be quick to judge. I know this isn't ideal, I have no problem repaying them, I had worked hard to rebuild my credit after a health crisis about 8 years ago and had been given (possibly bad) advice that paying them could reset the clock and hurt my credit. Two of them shouldn't even be there because I thought my insurance had already paid them, I would've just paid them had I known before they appeared on my credit report. So however the best way is to fix this I'm happy to work with it. My credit is otherwise no problems on it, my fico score shows around 690 right now so not perfect but within mortgage territory, I believe.

The other side of the coin is TDS, by our calculation, the banks would calculate it at 43-44%, GDS is about 23%. We can bring TDS down, most of it isn't really an issue and is gone in just over a year. How much we need to bring it down is where we got different advice. The one who had no problem with the collections gave a somewhat crazy number that didn't make sense. The other one gave a number that made perfect sense, but had issues with the collections.

So given this information, I can finally get to my concern. None of these issues are impossible to overcome, we can probably do the 20% down if we need to, but paying 3.5+% interest right now seems insane. Similarly, we could pay down the amount of debt that the other broker suggested but I'm not entirely convinced he's being completely forthcoming and won't just spring a similar rate on us. The goal is to pay things down anyways but how much and how fast is different.

Is it worth talking to another broker? My girlfriend's credit is better than mine, literally, the only negative on either of our credit scores are my collections, and even still my score is decent. Or are the collections going to be a kiss of death on interest rates for the next 12 months?

[Edit] Just to clarify as well the TDS and GDS numbers are with the estimated mortgage/heating/taxes included
Broker A is correct. Broker B has no idea what they're talking about.

Assuming your credit is good outside of the unpaid collections, all you have to do is pay the collections off before closing day.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Sr. Member
Aug 15, 2014
560 posts
189 upvotes
East Gwillimbury
I work in collections, just pay it off in full and request for release letter via email. If you call in and inquire majority of the time collectors will assume you are applying for credit and can pull your credit report, doesn’t matter if you want to hide the fact that you’re getting a mortgage we can see in the inquiries section. Ultimately take the advice of the first broker, you don’t want to settle because it will be reported as settled in full rather than paid in full which means the creditor whether it’s the original creditor or agency took a loss to close out your account which doesn’t bode well when trying to attain future credit.
Member
Dec 12, 2011
203 posts
224 upvotes
Toronto
Yes that's true collection agencies can see in the recent inquiries but only if they have the newest credit report. We only used to pull new credit bureaus if we felt there was $ to collect since the collection agency hated wasting $. Also afaik paid in full and settled in full didnt affect the credit any differently. The credit was already screwed at that point. It just allowed the debtor to make forward moves after it was cleared. Of course i would expect a current collector to encourage a debtor to pay everything in full though.
Sr. Member
Aug 15, 2014
560 posts
189 upvotes
East Gwillimbury
clydelee2020 wrote: Yes that's true collection agencies can see in the recent inquiries but only if they have the newest credit report. We only used to pull new credit bureaus if we felt there was $ to collect since the collection agency hated wasting $. Also afaik paid in full and settled in full didnt affect the credit any differently. The credit was already screwed at that point. It just allowed the debtor to make forward moves after it was cleared. Of course i would expect a current collector to encourage a debtor to pay everything in full though.
The newest credit report isn’t always required or needed there are triggers ( inquiries, trades, new phone numbers, workplace info etc) that can be seen without requesting for report that are given as part of contract that they may have with the agencies, every agency is different. You may think there’s no real difference between paid in full or settle in full but there’s a reason why it’s reported accordingly on ones credit. It’s not about being a current collector And getting someone to pay in full, it’s about providing all the information so someone can make an informed decision. If OP doesn’t want a shot at securing the best financing situation available to him/her I would say take your advice.
Member
Apr 15, 2009
297 posts
300 upvotes
toronto
“ Two of them shouldn't even be there because I thought my insurance had already paid them”

Call your insurance or check online if those were paid. If yes, call credit company and demand that these be removed from record. Similarly if there was bankruptcy or proposal of some sort, these may have been already included in it at the time and should have been removed.

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