Hoping to buy next year...will I be ready?

[honeybunnygal]

Hello,

I hope to purchase a home this time next year & wondering what else I need to do to get ready. I've been working on cleaning up my scores, which has been going well so far thanks to the advice I've gotten on the Rebuilding Credit board. I'm currently sitting at 689 TU/697 EQ. According to the fall-off dates on my reports, I should only have 2 collections on EX & 1 on TU by the time I hope to start buying (September 2010), all of which are medical collections. I plan to use the HIPAA process for medical debt removal once I get old addresses removed from all my reports. I have a judgement from 6/2004 reporting on all my reports as well. However, I am currently working on getting that removed (a motion to vacate on the grounds of improper service has been entered & the motion will be heard via my attorney next week). Hopefully that will be successful & the judgement will be vacated.

I have three credit cards & have been added as an authorized user on my mother's card. My utilization is reporting at 1%. I use my cards regularly, but only allow a small amount to report & PIF before interest accrues. My three credit cards were all opened in 2007, so they are all 2+ years old, never late, although they have small limits ($500, $450, $250). I also have a student loan which currently has a balance of $6300. I do have two 120-day lates reporting for the loan for 7/05-8/05 (I had my daughter & was unemployed). However, I then put the loan in forbearance & I have been making timely payments since 2/2006. My loan is now actually paid in advance (not due until 2/10, but I still make my $100 monthly payments). My gross income is $75k & I've been with my current employer for about 3 years now. I received a promotion 6 months after I started & have been at this position ever since.

As I mentioned previously, I have been fortunate to not be in a position of having to carry a lot of credit card debt. My daughter is currently in a Catholic preschool (the Chicago public schools in our area have been underperforming). Tuition is $550/month. I'm working on getting her into a better public school next year. Or, if I move, I would hopefully have better public school options available to lessen the cost of schooling/child care.

I've been saving slowly but surely since I started working with my current employer. I usually keep a $2k reserve in my checking account for immediate needs that arise. I have a credit union savings of $4500 (for emergencies) & a MMA (for homebuying) with $13k. At the rate that I am currently saving at (assuming nothing major happens), I could have $6500 in savings & $22k in the MMA by next September.

I want to know is there anything else that I should be working on & what I could afford? Also, if there are any suggested homebuying how-to references I can go over, that would be great.

Thanks!

[Anonymous]

Keep your job. Pay EVERY payment to ANYONE on time! Otherwise, it looks like you're good to go. Good luck.

[Anonymous]

Wow, congrats on the rebuilding.  Looks like you've developed great money habits.. keep it up!

[ShanetheMortgageMan]

It sounds like you have your credit situation figured out.  The only debt payment I saw listed is your $100/mo student loan payment.  The $550/mo tuition isn't a debt, so it's not included in the debt to income ratio.

Assuming a 2% tax rate for Chicago, $90/mo for insurance, with a 3.5% down payment on an FHA loan you'd be looking at around a $325,000 sales price as where you could comfortable qualify up to.  The payment on that sales price would be around $2,500/mo when all things are considered.  Qualifying doesn't mean you can afford though, you may be able to qualify for a mortgage payment much higher than what you could afford, or you might be able to afford a much higher payment than what you could qualify up to - so remember that they are separate terms.  While your income might make you ineligible for the Illinois Housing Department Authority programs, they still offer very helpful first time homebuyer education classes.  http://www.ihda.org/