@annah wrote:I would like to qualify for a mortgage next year. January/Feb is the goal, but realistically, we wouldn't be moving anywhere until the school year is over, so June 2013 is the deadline. We would like to move to a small town in Minnesota. We will be working with my husbands credit, since he has the job, and my credit history is worse. I have some questions that I would really appreciate some help with. Husband's income is around $35k. We would be shopping for a house in the $50-$90k range. He has been at the same job a bit over 5 years. His hours were cut, and we couldn't pay our bills for a time. We made a large payment on our car, to help increase our monthly cash. For the first time in years, we can afford to start paying down debt. We live in a mobile home, and just made the last payment on the balance. We still have to pay lot rent, but the sale of the mobile will give us a little cash later on. We have approximately $400 a month that can be spent towards debt. I also just got a job, which will bring in another $950 after I pay daycare, but I don't want to rely on that money as part of a debt-paydown stragedy, I'd prefer it to be extra cash.
Current credit:
We just got our tax return, and paid off all but $700 on our car. It deferred the payment date, so our next payment is due 10/13.
Husband currently has an overdraft line of credit, $3000 limit, maxed.
we have a joint line of credit, $1000 limit, maxed.
Credit card: $3500 limit, maxed
Credit card: $300 limit, $250 balance
Student loans, in payment status, but owe $0 per month, as part of their new income based repayment plan.
Collections (all 3 years old):
1 judgement owe $1900
1 loan, $2900
1 credit card $1000
I know all of this will need to be payed down to virtually nil prior to getting a mortgage. Between our new extra monthly cash, my new job, and next years tax return, it should be able to be paid down. But I can't figure out what order they should be paid in. We have 0 savings, so I will first put some money aside for emergencies.
Should we pay off the judgement first, since it could potentially end up with wage garnishment? I assume we should pay collections before paying down current debt, but I'm afraid to. Since they seem to have forgotten about us, I'm afraid to make a small payment and then have them file for judgement. Should we wait to pay until we have the cash for the full amount owed?
Tough call. If the judgement isn't collecting interest and they aren't currently pursuing a garneshment I would pay off the cards that are adding on interest. If the judgement starts rearing it's head go ahead and knock it off.
I know having a "settled" is worse for the fico than a "paid in full" but will a lender deny us if the accounts are merely settled?
All they are concerned about is that the debt is settled and a judegement won't be obtained and affect them getting paid for the house or a lien obtained. Sure it doesn't look as good but it really doesn't amke a difference.
We should be able to have $10k for a downpayment. If we can get his FICO into the low-mid 600s, will that be sufficient, or do we need to plan on more cash?
FHA is likely what you are going to be using and you only need 3.5% so that cash is more than sufficient and will give you cash for moving and new furniture as well as reserves.(which banks love to see)
When buying a house out of state, do we apply for a mortgage where we are now, based on his current income, or try to move first into a rental and get a job in the new state? It is my assumption that we would qualify here, and then go out of state to house shop.
That's a good question. I would imagine they are going to want you to have a job at the location your going to be moving to before giving the loan, they want to be paid afterall and a job is crucial to that. As long as it's in the same line of work a month or two of check stubs should be sufficient.
@annah wrote:
I wonder if he were to get a job offer from somewhere there prior to applying, if that would be sufficient...
You'll need a month or two of stubs first.