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Is it worth it? Experience?

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ccsauer
Contributor

Is it worth it? Experience?

Good afternoon, all. I've been reading through these forums, since I have been obsessing about my credit score for the last 2 years or so, but haven't really done much research or found any good forums...until now. A little background: I'm 25, my fiancee is 24, we've both had jobs in our major for 2 years now out of college (that first year out was killer, neither of us found a job in our major) and I proposed a few months ago with a very nice ring, much to the dismay of my newest credit card. For some credit background: I somehow was smart enough...and dumb enough at the same time...to get myself a credit card at age 18. I was relatively good about paying it all off at first, but got worse and worse, but always paid double my minimum. Then I went to Japan for a study abroad during the summer, which meant I didn't work as much (during college i only worked during the summer) so that first semester back's books put me over the limit on my card after nearly maxing it out in Japan. So, of course, i missed a month's payment, went over the limit, got service charges and late payment charges and over limit charges, which, of course, led me to freaking out and not telling my parents, which led me to missing 4 payments in a row before asking them for help. Then, problem #2, 3 years later I was unemployed for 3 months and missed one payment. Other than those 2 things, my credit report is pretty clean, exept for inquiries, but I assume that's normal (apartment companies, my car, a few new cc's). I have a 2 credit cards from visa, 2 mastercards, a discover, and a bank card. I have a Kohls charge card, a Honda finance account, and a strong record of paying rent on time along with all other cards except that one that plagued my past for too long (it is now paid off). All my debt is at 0% APR for the next 10-11 months(Thanks Chase!). Ok, now we're current. Oh, except for her: She didn't get a credit card until after college, but has always paid the full balance and has a ton of money saved up, whereas after the ring i bought her, I am back in relatively major debt. Ok, NOW we're current. So, we're looking to purchase a house soonish, my credit isn't horrible (691-697 depending on the bureau) and hers is near mine, but a little less, i believe, since my length of credit history is stronger than hers, plus i have a higher limit and other such things. She makes a good income (40K) as do I (50K before my annual raise in July, so, maybe 53-55K). My question is: Do you think we should wait until my cc debt (13K, mostly the ring) is paid off before applying for a mortgage, thus raising my credit score, (and hers, simply based on time) or do you think we'd be in good shape to go ahead and apply now? The market around here calls for a minimum of a 230K mortgage, but we're looking around the 290K level and I'm worried we might not get approved for that amount. Also, if we're looking at July to be done and moved, should I get pre-approved now? How will that negatively effect me in the long run if I get pre-approved by 3 or 4 places with them checking my credit (all within 14 days Smiley Happy ) but not closing for another 2 months? Should I take the effort to try and get discover to bump those old indiscretions off my record? Should I try to get the credit inquiries that were on my record in the past taken off somehow? What are my options? Let me know what you guys think!?
Message 1 of 7
6 REPLIES 6
Anonymous
Not applicable

Re: Is it worth it? Experience?



ccsauer wrote:
My question is: Do you think we should wait until my cc debt (13K, mostly the ring) is paid off before applying for a mortgage, thus raising my credit score, (and hers, simply based on time) or do you think we'd be in good shape to go ahead and apply now?
Yes.  No.
 
IMHO, I think you should wait until things settle down before even thinking about buying a house. The question really isn't whether or not your credit is in good shape; it's whether you and your finances overall are. You have a history of running up debt and then paying it down and then running it up again.  It ain't so easy once you've got a mortgage, and the price you pay for screwing up could be foreclosure.
 
When are you planning to get married?  Have you two discussed how you are going to pay for the wedding?
 
Why are you planning to spend 60k over the minimum in your housing market?
 
Sorry if I sound harsh, but I hate to see someone rush into buying too much house too soon.
 
Have you talked to your fiance about these issues?  What's her view?
Message 2 of 7
ccsauer
Contributor

Re: Is it worth it? Experience?

Ok, one by one here: First off, i appreciate the frankness, I prefer it. However, as for the running up credit issue, the first issue was the fact that my parents would not allow me to work during college, they thought it would screw up my studies (yes, yes, I know, not a real problem, but it is when they say that and then don't give you any money, so you're stuck at a loss). The Japan thing was a once-in-a-lifetime chance, which I knew would put me behind the 8-ball, but I didn't understand credit as much then as I do now. As for the ring, that was a calculated purchase. We've been dating over 4 years and we've wanted to get married for the last couple, so I took the next step. I did the smart thing in getting it at 0% for 15 months, and despite the large "loan" it will be paid off by the end of the year, mortgage, wedding, honeymoon, or not. So, as for my "history" I don' think that's an issue. As for when we're planning on getting married, we have set the date for August 4th of this year. Her parents are paying the majority of it, my parents are throwing in a bit, and we are throwing in a bit. The honeymoon is being put off for a while while we decide on the whole house issue. As for the "spending 60K over the minimum," well, because we don't want a 60-year old house in an unsafe neighborhood that 7-10 years down the line will sell for less than what we're going to pay for it. Together we'll be making about 95K a year, OH! okokok, I forgot a little bit of important information that may help clear things up: she has about 18K saved up for a down payment, and her parents are possibly going to help us out with a small amount for our "wedding present." So, that changes your perspective a bit, but what I was going to say before I remembered I hadn't said that was, we have $8000 or $5500 or so after taxes and insurance and 401(k) and such per month. a 285K mortgage would cost, PIMI: ~$2300, my car and student debt payment and cc minimums and...basically all out monthlies together would be around $2000, and I plan on paying my credit card down every month with the remaining $1000, after we save a few thousand for emergencies. My issue is not whether we can do it, it's whether the mortgage brokers would approve us for a large enough loan. Do you disagree? Again, I like the honesty and the forwardness, so, lemme have it! Smiley Wink
Message 3 of 7
Anonymous
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Re: Is it worth it? Experience?

Hey, no need to justify your life to me.  Just trying to get you to think it all through.  Sounds like you've run some of the calculations.  One thing to beware: you said you're "throwing in" some money for the wedding.  I'd set a clear amount for this; weddings tend to get totally out of hand.
 
So, to answer your question:  Will the lenders and mortgage brokers offer you a mortgage for the amount you want?  Sure.  At what interest rate and on what terms?  I have no idea.  But it's bound to be a better deal later, once your fiancee's credit has aged and you've paid down more of yours.  How much later?  That's like asking, how long is a piece of string?
 
Have they offered mortgages to people who had no business buying houses?  Sure.  (Was that the fault of the lenders or the borrowers?  That's a matter of opinion, and there's another thread here somewhere with strong views on both sides.)
 
In the end, it's up to you to figure out how much house you can afford, and it sounds like you've done a lot of thinking about that.  Good luck, and congrats on your upcoming nuptials!
Message 4 of 7
Anonymous
Not applicable

Re: Is it worth it? Experience?

ccsauer,
 
Whether you're buying a house in July of '07 or not until '08, it is a good idea to try and clean up your reports. That said, high 690s is darned good. 720 or thereabouts will give you the best possible mortgage available. If there are any old baddies you can pop loose, it just might be enough to get up to the magical 720.
 
Old lates can be GWed. Did anything go to collection or chargeoff? Inquiries won't hurt much, but they can be bumped or disputed off.
http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=3681&query.id=4622...
 
You said you have $13K at 0% on Chase. I presume that's a CC. What's the util of that CC?
 
Three additional things to consider when buying a home. Location, location, location. There are some markets around the U.S. where ya might wanna try to buy ASAP, but in others it might be best to wait and see if that market's bubble is done bursting.
 
$18K down on a $295K house is 6% down. That should help you out quite a bit.
 
I would try to kick loose any old bads. You are about as close as you'll get to the best terms possible. A 720 FICO should get you to best. If you're in a market when waiting isn't a good idea, then I say go for it.
Message 5 of 7
smallfry
Senior Contributor

Re: Is it worth it? Experience?

I'd be inclined to wait on the house especially if it was in a metropolitan area where prices have run up a lot. I'd pay the debt off entirely and save at least 25% for a down payment. If you and the lady can handle living below your means for a couple two three years then you might make it together. Nothing like home cooking to see what's in store. I know the market is a bit different than when I bought my first house but I put down 50% and made sure that I could pay the mortgage on my own salary. Good luck and make haste slowly. The real estate market isn't running away.
Message 6 of 7
smallfry
Senior Contributor

Re: Is it worth it? Experience?

95K you're clearing about 1200 per week or only about twice your monthly knot for the house then there are property taxes and all the other bills you'll have. Gonna be tight. Closing costs as well.
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