Want to buy a house! Need Help

[Anonymous]

I'm a single mom of four that is ready to take that leap into home ownership.  I have two credit cards, one of which I owe Discover $1,200 on a $5,000 limit and the other is a Visa with $6,000 on an $8,000 limit.  I have two charge offs on my credit report that are really hurting me --- one is for a joint checking account that was overwithdrawn by the other signer, total = $2,500 and the other is $350 to a utility company.

My biggest question here is what do I pay first?  I have $6,000 saved to help me on my quest.  Should I pay off the entire balance of the Visa first or should I pay off the charge-offs first?  Which would put me in a better financial situation?  Also, would it be better to work out a deal with the bank for the charged off bank account since it was a joint account?

Thank you experts!

[JoeBJay20]

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@Anonymous wrote:

I'm a single mom of four that is ready to take that leap into home ownership.  I have two credit cards, one of which I owe Discover $1,200 on a $5,000 limit and the other is a Visa with $6,000 on an $8,000 limit.  I have two charge offs on my credit report that are really hurting me --- one is for a joint checking account that was overwithdrawn by the other signer, total = $2,500 and the other is $350 to a utility company.

My biggest question here is what do I pay first?  I have $6,000 saved to help me on my quest.  Should I pay off the entire balance of the Visa first or should I pay off the charge-offs first?  Which would put me in a better financial situation?  Also, would it be better to work out a deal with the bank for the charged off bank account since it was a joint account?

Thank you experts!

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Firstly, you want to amass savings of at least 3 months of salary (and probably 6 months or more in this economy) before worrying about dedicating extra resources to paying down debt.  In addition to giving you a rainy day fund, lenders like to see that you have a few months worth of salary when applying for mortgages.  As far as your charge-offs, you want to work with those companies to see if they would be willing to do a PFD, in which they would agree to delete the accounts from your credit reports in exchange for payment.  Paid chargeoffs are scored the same as unpaid chargeoffs.  This tactic has varied degree of success, influenced by both who you can get in contact with at the companies and whether or not your account is still within SOL.  It might get rejected, but you can keep trying again and again unless the company files a suit against you, at which point you would need to pay.  If you can't get a successful PFD and want to negotiate, you want to make sure that they companies will report your account as paid in full, as your report will be further damaged by having accounts closed as settled.

[MarineVietVet]

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@Anonymous wrote:

I'm a single mom of four that is ready to take that leap into home ownership.  I have two credit cards, one of which I owe Discover $1,200 on a $5,000 limit and the other is a Visa with $6,000 on an $8,000 limit.  I have two charge offs on my credit report that are really hurting me --- one is for a joint checking account that was overwithdrawn by the other signer, total = $2,500 and the other is $350 to a utility company.

My biggest question here is what do I pay first?  I have $6,000 saved to help me on my quest.  Should I pay off the entire balance of the Visa first or should I pay off the charge-offs first?  Which would put me in a better financial situation?  Also, would it be better to work out a deal with the bank for the charged off bank account since it was a joint account?

Thank you experts!

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IMO the charge offs should be your first consideration. Even if you pay them off the damage remains although an underwriter would see that you paid your debt. You need to get both of these completely removed. Contact the creditors and offer to PIF if they will agree in writing to have these negative entries deleted from all three CRA's.

Do you have any other derogatory items in your credit file that need to be addressed? A lender will see everything of course. What are your scores right now? All three reports and scores will be pulled and usually the middle score is what a lender will look at. It seems as if a middle score of at least 620 is the norm right now.

For a mortgage it's not just scores that are examined. Your income, DTI,  and job history are considered. The utilization on your VISA is 75%. That's very high. If you can get that and the Discover down to the 1-9% range it would help you.

I'm certainly not an expert on mortgages because it's been many years since I applied for one. You might ask one of the mods to move your post to the Mortgage Board where the real experts are.

Good luck to you though.

From a BK years ago to:
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802
3/10 EQ- 800

You can do the same thing with hard work

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