Advice for preparing for first mortgage

[CreditJim]

Hi all. I'm about to start the process of buying my first house. Here is the background. I am a full time employee, been with my current company for 1 year and 8 months so far, but I've been in the same industry now for the past 10 years. My gross income from this job last year was $62,000. Seperately, my wife and I also jointly own our own business. We started this late 2011, so 2012 was the first full year in operation and we made a net profit of $22,500k from a total income of $58,500. Because the business does not have 2 full years of tax returns, I beleive I will have to discount the business income. My wife's credit is not good, so we are planning on applying in my name only. My latest FICO score is 673 transunion (from Walmart). The other agencies should be a bit higher as I had a few transunion inquiries around Christmas. I have two auto loans in my name, one with a remaining balance of $8000 and the other is a new loan obtainined at Christmas, with $15,000 remaining. Total monthly payments for the two combined is $831. I am planning on paying the older loan off completely, as the interest rate and monthly payment on that one is higher. This would leave my total debt at $15,000 one one card, with total monthly repayments at $371. I have paid off all my credit cards in the past few days, so I'm hoping that will also bump my score a bit (I had about $3000 on various credit cards with interest-free financing).

Now for the baddies. I have one 30-day late that is 2 years old this month. Does it age off slightly at 2 years? The other baddie is an unpaid $848 charge-off from 2008. I understand this needs to show as settled before I apply for a mortgage - I've been trying for a pay in full for delete with BoA but of course they won't have it.

I have around $25,000 for a downpayment. So my questions are, do my plans sound right, to pay off one of the car loans to lower my DTI. Settle with BoA. Allow all my credit cards to report a zero balance except for one showing a very small balance. Do you think I will be able to qualify for a mortgage based on the above info, or am I wasting my time? How much should I look at? I'd like to buy a house for up to $200k and would like a 15-year fixed mortgage. This would give me a monthly payment, including property tax, MI and homeowners insurance for around what I pay in rent at the moment.

[CreditJim]

Anyone?

[mauve]

I have no idea what the property tax is like where you are.

So I suggest checking out this calculator and playing with the numbers

http://www.bankrate.com/calculators/mortgages/new-house-calculator.aspx

What's wrong with the wife's credit report? You can go to the rebuilding board to work on it.

Yes, the 2 year mark is when a 30 day late starts hurting you a lot less.

While a 15 year loan is tempting because of the rates, you may be looking at needing to go to the 20 year or 30 year loan if property taxes are too high or some other numbers don't work out for you. You'll have a less attractive rate, but you should have no problem qualifying.

[CreditJim]

I've been factoring in the property taxes monthly using Zillow's calculator. I'm looking to buy a house that with everything included, pricipal and interest, property taxes, home insurance and mortgage insurance, all totals around what I'm paying now in rent. I just had a look at the calculator you provided which puts me in the right ballpark.

What should I do about the BoA CO? I believe as it's from 2008 and I'm in Texas that it is beyond the statue of limitations?

[mauve]

Establish residency in NY! Paid debts 5 years or older can't be reported because of their state's laws.

I'd check the rebuilding board for BoA contacts and suggestions. If they won't budge on PFD, maybe pay it and then send them goodwill letters.

Also, check into different lenders - my CU offers the same rates to qualifying scores, but they charge more or less points based on your LTV and credit score.
Actually, for a 15 year loan, they don't charge any points regardless of LTV and scores.

Statute of Limitations is about how long they have to sue you legitimately and has nothing to do with the CRTP (credit reporting time period). They can still sue you after SoL is up, but your defense can simply be to show up in court and say "This is past SoL".

[prince1969]

If you are doing an FHA, you should be able to qualify with your credit score. I am buying a house too and doing the 15 year FHA. It doesn't cost that much more than the 30 year FHA loan because they make you pay pmi for 5 years because of recent changes in the law. You can almost purchase discount points to get an even better deal.

[CreditJim]

I was really hoping to do a conventional mortgage.

[violetsmom]

FYI you are in a community propert state so even if your wife is not on tr loan her debts will count against you

[CreditJim]

For FHA, yes. From what I can find conventional loans don't look at that. Her debt isn't big anyway, it's her scores that are bad, which wouldn't matter even in the case of an FHA.