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credit and downpayment questions FTHB
Hey ladies! DH and I are trying (aka stressing) to decide how to go about home buying. Due to DH being military we have always rented. Well, he got out of the military about 2 years ago and since we have also added a cute little member to our family, and I don't mean a puppy 
. A little background about us...
We have never been good with money. We got married very young (19) and buried ourselved in debt and late payments. In May 2009 we filed bankruptcy. Things obviously got better for a while and then we got pregnant. We did really well with our finances when I was pregnant mainly because we knew the baby would need some stability. Then in October 2010 DH got awful news, they weren't approving his reenlistment due to a reduction in force. Crushed. That was 8 years of his life, gone. I immediately moved home and in with my mom (high risk pregnancy and needed to find a high risk OB asap), and he followed soon after. We paid off all of our debt with his severance pay... and blew through the rest. We now have AWFUL credit (mine is a 523 and his is a 560). We now each have a credit card in default (low pay off) and late payments month after month on our vehicle due to the struggles that came with him having to find work and start over.
We started Dave Ramsey last April and made it halfway through before his job took him out of town to work for several weeks. I continued listening to the CD's. We have been on time with payments for 4 months and I am trying to save and pay off the little debt we still have. I am proud of us for the small strides we have made!
My question is, HOW IN THE WORLD do I get our credit to start going up?! It still seems to be at a standstill! We live in a dangerous location and really need to buy a home (or rent i suppose) within the next year. Is that even a possibility for us?! We have a STRICT budget and have been sticking with it, and saving. We hope to have $7,000 to put down on a new home next July. However, I do not know what the "rules" are for credit or how soon we will be able to get approved. Any ideas? Anyone have any advice here? Good or bad I am willing to hear it!
Thanks in advance ladies!
Re: credit and downpayment questions FTHB
If you go with go with FHA, some mortgage companies will let you go through with a credit score of 580, so long as you have no late payments for a year and 12 months of rental history. Are you still living with your mom? Somehow you'd need to get her to say she is your landlord and charging you X amount of money for rent.
With FHA you can put as little as 3.5 percent down. With 7000 you're looking at a home for under 220,000, would that be doable for you in your area?
One thing you might want to think about is debt shock. Which is, if you're currently living rent free, you might be surprised by the stress of a mortgage, home owner's insurance, taxes, heat, electric. It adds up quickly. That is why they require 12 months of rental history if your credit is under 640.
As far as getting your credit to go up, do you have a full credit report? You really need to get out standing debt off there. Once you hit 6 months of no late payments you're going to see a jump up and then another one at 12 months. Unfortunately it takes 7 years for neg reports to come off. But most underwriters are looking for 12 month behavior patterns. The best thing you can do is get your credit cards in good standing. If those accounts are closed you will have difficulty getting a new card, so in that case you would want to go to your bank and get a secured credit card. This means you would give them $500-1000 and prepay a credit card, and then borrow and repay against that. That way it is low risk for the bank and win win for your credit. Do you have car payments? Make sure those are in good standing.
And contest anything on your credit report that doesn't make sense, some companies won't respond in time to the contesting and they will just vanish.
Good luck! Keep those payments on time, get that money into savings, get that secured credit card, and be patient!
Keep doing what you are doing - it takes time to have your FICO score improve and more time to get it to where you will get the best rates for a mortgage.
You will need to save money beyond your downpayment - you NEED an emergency fund, moving costs, utility start up costs, renovation/repair costs, decorating/furniture/appliances, yard items & tools, as well as a long list of miscellaneous that all adds up.
If needed find a different appartment if you must get out of your location, but do NOT buy a house until you are in solid financial circumstances.
Pay off your consumer debt. Give the lenders a solid history of good financial management and incomes to support home ownership. Show them that you have learned from past mistakes. Interest rates are not going to change much for the next 2 years.
Thanks ladies. I think we may be forced to rent a home for a year before we are able to buy.
$220k is definitely doable in our area, we are looking at 150k - 180k. The housing market in Houston is incredible thankfully. We no longer live with my mom, we are renting a small apartment closer to my husbands workplace and I started my job about 3 months ago. If we have some debt now and start paying it off and paying things on time do we have to wait 12 months after the debt is paid or just 12 months from now? Thank you ladies for your help... I have heard secured credit cards can help your credit score increase quite a bit. Patience is definitely something I am struggling with! var sndpID = '11805'; var sndgID = '{6D8DCAFE-135D-4C0D-8B3A-F8267E6A9BDF}'; var CorrectedDomain; var OriginalDomain; function sendoriInline2(){function b(a,b,d){if((a==-1||!c(d.charAt(a)))&&(b>=d.length||!c(d.charAt(b)))){return true}return false}function c(a){var b=a.charCodeAt(0);if(b>47&&b64&&b96&&b";i.newText="";var q=0;for(o=0;o
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I was in similar situation (bad credit, bankruptcy on record, etc) but got it together in 2 yrs. FHA loans require 3.5% down payment plus closing costs (around $7,000) so keep that amount in back of mind, you have to wait 2 yrs after bankruptcy discharge date to apply for FHA loan. I got my credit slowly up by following my attorney's advice: we first got a tv from Conns and made timely payments, we didn't miss any payments at all, even if it's the minimum, try to not be late. If you rent an apartment in the meantime, do not be late on rent payment because lender will require a) bank statements showing you have sufficient funds and no overdrafts b) they will check with apartment complex to verify you've never been late and c) they will ask for copies of your discharge letter along with the debtors list that should be in your bankruptcy papers. My credit score rose to almost 700 in those 2 yrs, don't be late on any payments, try very hard to save and not over-spend. I know it's hard sometimes but trust me, we just received our house Monday and the sacrifices are definitely worth it, good luck!