Question: Payment HIstory and Getting Approved

[Jishosan]

My wife and I pretty well paid, we have  $141k in annual income, with stable growing incomes (I've been at my job for almost 9 years, my wife almost the same). I have credit cards that have been at max balance with minimum payments for some time (though low overall number, $14100 total balnce), and my wife and I finally decided to buckle down and pay down the cards and put some saving aside. We've been TERRIBLE about saving in the past (no savings to speak of), but we make enough and our expenses are low enough that we could easily put aside $40k in savings a year. 

We plan on having the cards paid off in Mid-March. After they are paid, how long will it take for the banks to look more favorably on our low balances? How many months of maintaining low balance to cancel out a long history of maxed balances? We're looking at purchasing homes in the 250k range, and we've thought about going with FHA (we'd really like to look at some options by August or so, and next summer at the latest). Will that be long enough? We might have enough saved by next year to do conventional, and I think our income is certainly a big factor in the equation. 

Thoughts or experiences? 

[StartingOver10]

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@Jishosan wrote:

My wife and I pretty well paid, we have  $141k in annual income, with stable growing incomes (I've been at my job for almost 9 years, my wife almost the same). I have credit cards that have been at max balance with minimum payments for some time (though low overall number, $14100 total balnce), and my wife and I finally decided to buckle down and pay down the cards and put some saving aside. We've been TERRIBLE about saving in the past (no savings to speak of), but we make enough and our expenses are low enough that we could easily put aside $40k in savings a year. 

We plan on having the cards paid off in Mid-March. After they are paid, how long will it take for the banks to look more favorably on our low balances? How many months of maintaining low balance to cancel out a long history of maxed balances? We're looking at purchasing homes in the 250k range, and we've thought about going with FHA (we'd really like to look at some options by August or so, and next summer at the latest). Will that be long enough? We might have enough saved by next year to do conventional, and I think our income is certainly a big factor in the equation. 

Thoughts or experiences? 

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The bank looks at your credit report at the time of application. So if you have zero to low balances and enough in savings, you will be fine. You don't have a history of late pays, right? Just a history of maxed cc's. Once you pay off those cards, it will not be a factor. Your income is good. You should be in great shape for conventional financing with as little as 5% down, but I would aim for 10% down if you can do it (your PMI will be much less)

[Jishosan]

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@StartingOver10 wrote:

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@Jishosan wrote:

My wife and I pretty well paid, we have  $141k in annual income, with stable growing incomes (I've been at my job for almost 9 years, my wife almost the same). I have credit cards that have been at max balance with minimum payments for some time (though low overall number, $14100 total balnce), and my wife and I finally decided to buckle down and pay down the cards and put some saving aside. We've been TERRIBLE about saving in the past (no savings to speak of), but we make enough and our expenses are low enough that we could easily put aside $40k in savings a year. 

We plan on having the cards paid off in Mid-March. After they are paid, how long will it take for the banks to look more favorably on our low balances? How many months of maintaining low balance to cancel out a long history of maxed balances? We're looking at purchasing homes in the 250k range, and we've thought about going with FHA (we'd really like to look at some options by August or so, and next summer at the latest). Will that be long enough? We might have enough saved by next year to do conventional, and I think our income is certainly a big factor in the equation. 

Thoughts or experiences? 

---

The bank looks at your credit report at the time of application. So if you have zero to low balances and enough in savings, you will be fine. You don't have a history of late pays, right? Just a history of maxed cc's. Once you pay off those cards, it will not be a factor. Your income is good. You should be in great shape for conventional financing with as little as 5% down, but I would aim for 10% down if you can do it (your PMI will be much less)

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That's great to know. As you can see, the limits were actually very low compared to our income, we just always found better things to spend on than paying them down. No history of late payments (there is one account on my report that had a 30 day late payment, but that was 4 years ago, and I might be able to get it removed before we start looking since it's actually an error). All my current accounts are paid and in good standing, including my auto loan, and i have very long solid rental history (6 years at my previous location, 3 years at my current location, and my rental payments are essentially the same as my mortgage payments with taxes & pmi would be). 

Thanks for the info. 

[n0smirc]

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@Jishosan wrote:

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@StartingOver10 wrote:

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@Jishosan wrote:

My wife and I pretty well paid, we have  $141k in annual income, with stable growing incomes (I've been at my job for almost 9 years, my wife almost the same). I have credit cards that have been at max balance with minimum payments for some time (though low overall number, $14100 total balnce), and my wife and I finally decided to buckle down and pay down the cards and put some saving aside. We've been TERRIBLE about saving in the past (no savings to speak of), but we make enough and our expenses are low enough that we could easily put aside $40k in savings a year. 

We plan on having the cards paid off in Mid-March. After they are paid, how long will it take for the banks to look more favorably on our low balances? How many months of maintaining low balance to cancel out a long history of maxed balances? We're looking at purchasing homes in the 250k range, and we've thought about going with FHA (we'd really like to look at some options by August or so, and next summer at the latest). Will that be long enough? We might have enough saved by next year to do conventional, and I think our income is certainly a big factor in the equation. 

Thoughts or experiences? 

---

The bank looks at your credit report at the time of application. So if you have zero to low balances and enough in savings, you will be fine. You don't have a history of late pays, right? Just a history of maxed cc's. Once you pay off those cards, it will not be a factor. Your income is good. You should be in great shape for conventional financing with as little as 5% down, but I would aim for 10% down if you can do it (your PMI will be much less)

---

That's great to know. As you can see, the limits were actually very low compared to our income, we just always found better things to spend on than paying them down. No history of late payments (there is one account on my report that had a 30 day late payment, but that was 4 years ago, and I might be able to get it removed before we start looking since it's actually an error). All my current accounts are paid and in good standing, including my auto loan, and i have very long solid rental history (6 years at my previous location, 3 years at my current location, and my rental payments are essentially the same as my mortgage payments with taxes & pmi would be). 

Thanks for the info. 

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I would get the 30 day late removed if it's an error but it shouldn't be hurting you anymore, scorewise. What's really keeping your scores down right now is those maxed out CC's. If you get them paid off/down significantly, your score will get a big boost and you could hit the sweet spot for the best rates for conventional financing. (Try for all but one reporting at $0 & 1-8% of the limit on the last card. You'll have to maintain this at least until you close) Also, think of the interest you'll save. You're paying a lot on interest for carrying such high balances with only minimum payments. I'm not sure saving would make any since right now with such high balances.

Does your wife have similar scores/same accounts?

[Jishosan]

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@n0smirc wrote:

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@Jishosan wrote:

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@StartingOver10 wrote:

---

@Jishosan wrote:

My wife and I pretty well paid, we have  $141k in annual income, with stable growing incomes (I've been at my job for almost 9 years, my wife almost the same). I have credit cards that have been at max balance with minimum payments for some time (though low overall number, $14100 total balnce), and my wife and I finally decided to buckle down and pay down the cards and put some saving aside. We've been TERRIBLE about saving in the past (no savings to speak of), but we make enough and our expenses are low enough that we could easily put aside $40k in savings a year. 

We plan on having the cards paid off in Mid-March. After they are paid, how long will it take for the banks to look more favorably on our low balances? How many months of maintaining low balance to cancel out a long history of maxed balances? We're looking at purchasing homes in the 250k range, and we've thought about going with FHA (we'd really like to look at some options by August or so, and next summer at the latest). Will that be long enough? We might have enough saved by next year to do conventional, and I think our income is certainly a big factor in the equation. 

Thoughts or experiences? 

---

The bank looks at your credit report at the time of application. So if you have zero to low balances and enough in savings, you will be fine. You don't have a history of late pays, right? Just a history of maxed cc's. Once you pay off those cards, it will not be a factor. Your income is good. You should be in great shape for conventional financing with as little as 5% down, but I would aim for 10% down if you can do it (your PMI will be much less)

---

That's great to know. As you can see, the limits were actually very low compared to our income, we just always found better things to spend on than paying them down. No history of late payments (there is one account on my report that had a 30 day late payment, but that was 4 years ago, and I might be able to get it removed before we start looking since it's actually an error). All my current accounts are paid and in good standing, including my auto loan, and i have very long solid rental history (6 years at my previous location, 3 years at my current location, and my rental payments are essentially the same as my mortgage payments with taxes & pmi would be). 

Thanks for the info. 

---

I would get the 30 day late removed if it's an error but it shouldn't be hurting you anymore, scorewise. What's really keeping your scores down right now is those maxed out CC's. If you get them paid off/down significantly, your score will get a big boost and you could hit the sweet spot for the best rates for conventional financing. (Try for all but one reporting at $0 & 1-8% of the limit on the last card. You'll have to maintain this at least until you close) Also, think of the interest you'll save. You're paying a lot on interest for carrying such high balances with only minimum payments. I'm not sure saving would make any since right now with such high balances.

Does your wife have similar scores/same accounts?

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Unfortunately, my wife does not have the same scores. She has no current credit to speak of, a few collections (nothing big, but we've been focused on debt and not older collections. I've been thinking about adding her as an AU to my accounts, but I'm not 100% sure how that actually affects credit scores. One of the things I've been trying to research here. Her credit scores are in the 620s right now, but we plan on addressing all of her collections through PFD as much as possible, and payment for the rest. We'll bring the numbers up, but my credit has been much more straightforward, and hers will be more complex for us to address.