Is Credit Holding You Back From Buying A Home?

Dana Anghel By January 25th, 2024 January 25th, 2024 No Comments

Low credit scores can be caused by a variety of reasons, and I’m not here to judge. 

Getting a mortgage loan approval is not that complicated. As with anything that’s worth it, a little preparation will go a long long way. So let’s start by identifying the problem, and getting you on the fast track to homeownership.

Step 1: Find out where you’re at

Head on over to to and get a free copy of your credit report from one (or each) of the credit bureaus. Look it over carefully, making sure the information on there is accurate. This will not give you your credit score, but if you want that as well, you can sign up for a free membership with Experian.

Step 2: Identify what you need to work on

a) Check for errors, accounts that don’t belong to you, and delinquencies reported – dispute anything that doesn’t belong.

b) If you had a Bankruptcy, Foreclosure or Short sale, make sure you meet the required waiting periods:

FHA: 3 years wait from Foreclosure/Short sale; 2 years from Chapter 7 Bankruptcy discharge, 1 year from the Chapter 13 Bankruptcy payment plan setup.

VA: 2 year wait on Foreclosures, Short Sales and Chapter 7 Bankruptcies; 1 year on the payment plan on a Chapter 13 Bankruptcy. Note that you can have enough VA entitlement left over for a new home EVEN IF your previous VA home was foreclosed on. You can contact me for help with calculations, or check out this guide directly from the VA.

USDA Rural loans: 3 year waiting period for Foreclosures, Short Sales, and Chapter 7 Bankruptcies; 1 year on the payment plan on a Chapter 13 Bankruptcy. Exceptions are possible based on your credit profile after the fact, so re-establishing credit and having a solid payment history after is crucial.

Conventional: Foreclosure has a 7 year waiting period (measured from the completion date); Short Sale is 4 years; Chapter 7 Bankruptcy is 4 years (or 2 years from dismissal), Chapter 13 Bankruptcy is 2 years. 

*Extenuating circumstances can sometimes cut these waiting periods in half, but they are hard to prove. An acceptable extenuating circumstance would be a borrower that had good credit history before he/she experienced a documented 20% min decline in household income, which lasted for a minimum of 6 months. 

c) Do you have judgements or tax liens? Student loans in default?

These are the more serious things to take care of. Judgements, tax liens (state and federal) must be either paid in full, or under an installment agreement with at least 2-3 scheduled payments to show for. Student loans in default will require 9 months of on time payments on a rehabilitation plan.

Utah State Tax Liens are particularly tricky – read about how to remove them here. Keep in mind that it will take 30 days after your payment in full before they will issue a letter invalidating the lien. 

The IRS Installment setup link can be found here.

d) Do you have accounts in collections?

Medical collection accounts are disregarded  when it comes to your mortgage loan application. They still hurt your credit, but there’s really nothing you can do about it, besides negotiating payoffs in exchange for removal. 

Other collection accounts are ok as long as they’re not less than 1 year old, and not more than $2,000 combined. It’s important to note that unless the collection agency agrees to remove a collection account once paid, paying it off doesn’t make much of a difference to your actual credit score. So if you want to make it right, get it removed as well.

e) Do you have late payments on any accounts?

Even if they’re accurate, as long as there’s not more than 2 in the past year, you should be fine.

Have an explanation ready. Call the creditors, and ask them if they will do a good faith removal on one or two of those payments (try to remove the more recent ones). Put an emphasis on your good payment history since, the fact that you set up auto pay to avoid missed payments (set it up) and the unique circumstances you found yourself in. Be nice in making this request – the creditors don’t have to comply, but some have helped people in the past.

f) Do you have any accounts that are close to the limit or maxed out ?

How much of your available credit are you using?

Maxing out an account will take 20-60 points of your credit score easily. Maxing out ALL of your accounts will quickly put you on the blacklist of “do not extend credit”. It’s important to know that the bureaus only receive your account balance once a month when the statement cycle closes, so try not to show a high balance at that time. 

Step 3: Contact me 

Now that you know what’s happening with your credit score, it’s time to look at numbers. Let’s figure out how your roadmap to homeownership looks like.

Send me an email with the details of your situation, and I’ll help you identify:

  • which loan program is best suited
  • if further credit work is needed (and what to focus on)
  • how much home you can qualify for (or what debt needs to be paid off/down to get you there

This isn’t a complicated process, so don’t overthink it. Have your most recent pay stubs handy, and I’ll guide the conversation.

Sometimes people are surprised they can qualify right away, and other times it takes months until they get to that place. Whatever your timeframe is: it’s OK. I’m happy to be a resource for you on this journey, and I’ll be EVEN HAPPIER when your hard work pays off.

Trust yourself, you too can do this. What do you need help with right now?