Effects of Debt on Obtaining a Mortgage

Dear Scott,
I was wondering about what sorts of ramifications my credit will have on my obtaining a mortgage in the future? Here is the situation, while in college I got myself into credit card debt (about $6000). After college I married a debt-free man (no student loans, 1 credit card great investments). Over the last 1 1/2 years we have paid my debt down considerably (currently I owe about $2000, each card is at about $500). One of them was charged off the other 3 were closed by the credit issuer.

Though my credit report is looking better, I would like to know how this will impact our obtaining a mortgage (not in the too near future- I'm 25 he's 27, we feel we'll be ready to purchase a home in the next 7-10 years). I'm very concerned about my credit rating inhibiting him. Our credit isn't too good. My husband had open heart surgery about a year ago and lost three months of work. We have some 30-60 days late. How do we get our credit back into order. Also our home is 100% financed. We have a adjustable rate on our mortgage. How do they decide if the rate goes up or down. How is it calculated and when? Every quarter? Thanks for your time.

--Darlene

Answer

Darlene,

It's very good that you're asking these questions because there can certainly be an impact on your getting a mortgage. When you apply to get a mortgage it's going to be in both your names so the bank is going to look at both credit reports.

They're going to see the same information that you mentioned but they're also going to see that you've taken care to rectify the situation by paying off your debts. I personally believe that by the time you're ready to buy a house none of that is going to matter at all! That's because it's so far in the future (7-10 years) that no bank is going to care about your college years. Plus by then it's all going to be removed from your credit report anyway.

Keep up the good work!

Scott