One of my agent clients, Al, called me two months ago to pre-qualify one of his buyer's, Tom. Tom needed 100% financing.
Tom never called me back though I left him numerous messages.
"Aaron, he isn't ready to speak with a lender yet. He wants to wait," Al said.
I told Al that was fine but that he shouldn't waste any time with Tom until Tom spoke with a lender.
Al is a real nice guy but he didn't follow that advice. He has spent the last two months showing Tom houses...some to lease-option, and some to buy.
Last week, Al called me.
"Tom found something he wants to buy and is ready to speak with you. By the way, he got with a credit repair expert. He spent $7,000 paying off a bunch of collections and he also enrolled in Credit Counseling. So his bills are under control and his credit should be a lot better," Al said.
In today's market, there is nothing you want to hear less than the words "Credit Counseling (CC)."
It;s a great service and it really helps people but, in the eyes of the lender, CC is the same as a Chapter 13 bankruptcy.
It shows that you cannot manage your credit committments yourself so you need the help of a third-party to come in and manage them for you. Obviously, that scares a lender, who you are asking to invest $100,000's in you away.
There is no way to get Tom 100% financing in today's marketplace while he is just starting credit counseling. We used to have it available in subprime, but not today.
Fannie Mae and FHA have some great programs that allow for people who have proven to be successful in credit counseling. If you have at least a 12 month pay history, with no lates, you may be able to buy a home or refinance it while in the program.
However, if you just got started in credit counseling, forget it.
To make matters worse, when I pulled Tom's credit, and ran it through our credit repair software, it turns out that the $7,000 he used to pay off collections, on the advice of the "expert," didnt even help his score that much.
He would have been much better off leaving his collections alone and paying down his current credit card debt to make it more managable.
He would have been able to qualify for a new home with ease. Most lenders don't care about your collections today so long as they don't affect title.
There are a few options for him but its now likely Tom will have to wait at least 12 months to buy a home. He is disappointed and I think kind of shocked.
Its not Tom's fault. He didn't know any better but his story teaches us some valuable lessons. If buying a home is the priority, please make sure your client gets with an experienced lender, who understands credit repair, before he makes any personal decisions on how to repair his credit himself.
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ahhhh....I've seen this happen before. I try to tell my clients NOT to do that if they are planning to buy. I'd rather spend hours with them trying to help them get everything in order then send them to a company like this. It basically takes them out of the game for 12 months! People always respond "But wouldn't it look good because I am taking care of the problem?" my response is always "They look at it as if you are in a Bankruptcy, to them it says you can't pay your bills" Then I ask them a simple question "look at it from their point of view, if somebody had to get help from someone else to pay their bills accordingly would you want to loan them $250,000 of your moeny?" Funny that most of them say "Well no I wouldn't."
Ummm, either do these people!