Want to get in shape for a mortgage... help?

[kcadams1980]

So, the DH and I have a combined spotty credit history (I'll detail below), but we're 30 yrs old now (e.g., grown-ups) and would really like to get to where we could buy a house (1st time buyers). We are in the process of paying off CC debt (total around $3500) using the snowball method - I estimate we should have that paid off by the end of this year. We are currently paying $1300/mo. in rent (it WAS totally comfortable for us before I took a lower paying job - for love of the work).

 

Aside from that CC debt mentioned above, I have monthly student loan payments of around $420 (damn you grad school) and my DH's car payment is $315/mo (I own my car outright). Other than that, we just have a few revolving account like gym memberships, cell phones (no land line), and utilities. Combined, we take home about $5000/mo. in income net. We have about $12,000 saved right now in our down payment fund. Each of us have a 5% payroll deduction that goes straight to savings acct with every check.

 

We would probably be in pretty decent shape for a mortgage if it weren't for the shady credit history... Here's what we're dealing with, any advice is appreciated!!

 

I have a small CC charge off (now in collection) from 2005, total amount is aprx $550. It happened when I was in grad school and we were barely scraping by... I've never tried to pay it because I know that it will stay on my credit report for 7 yrs regardless of what I do - am I wrong about this?? If it WOULD help my credit (for the purposes of buying a home) to settle it I WILL, but it will need to wait until we're done with the CC debt we're already working on (outlined above). Other than that, my credit has been spotless since around 2006 - I have been paying my student loans automatically & on time since 2007, and have 15 mos. of perfect history with a CC I opened up in 2008 (after a few years of completely abstaining from them).

 

DH does not have anything in collection (no charge offs), but he does have some recent late payments on CC's and paid his car payment late last month... How long should we expect that those late payments would be a big issue on the report? Are his recent late payments a bigger deal than my old charge-off, or vice versa?

 

We will need to use both our incomes to qualify for a home, since we make about the same amount in income each.

 

Once we get our current CC debt paid off, it will certainly help our monthly "comfort level" even in this higher rent house... BTW, we live in Houston, so $1300/mo for rent is fairly high. But I feel a little "lost" when it comes to a plan for getting us "mortgage ready," and would really, really appreciate any direction from you all that obviously know quite a bit about credit. I don't want to call a mortgage lender for advice b/c I think they will just try to talk us into applying for a loan when we're not ready. Thanks in advance!

 

Kelly

[arameth]

I think you're on the right track.

 

Paying down the CC debt = very smart

 

From your other thread, it looks like you're closing in on getting rid of the charge off. Definately pursue that aggressively, as that will really hurt during the mortgage process if it's still there.

 

It's too bad that you probably won't be ready before the end of the 1st time homebuyer program that the govt was running (ends april 30th). 8K would have helped quite nicely. But since home sales are still low and will be for quite some time, I'm sure you'll make out just fine when the time is right, and you never know what they'll offer next to get people to buy homes.

 

I agree on waiting on applying for the mortgage...that will result in hard pulls on your report. If you're not ready, there's not much benefit there. Continue paying down debt, and fix that CO first.

 

Good luck!

[flower]

It's been a couple of years since I worked on our credit, so I've forgotten all of the details. However, you are in the right place. Start reading and you'll figure it out. You're in much better shape than we were... we had much more debt than you have right now. You are in a really good place. You've done well.

 

I remember that I spent time writing to the card companies to ask if they would remove lates. Have you read about doing that? I think that my greatest victory was getting Discover to agree to remove multiple lates. We had a bad patch in 2003-2005, and it needed lots of cleanup!

 

You can do it!