Saturday, February 28, 2009

Digging out from debt

Today we got some exciting news I thought would be fun to share.

As I've mentioned, we've been working really hard towards buying a house in the past few months. The thing holding us back was needing to pay off some debt in order to qualify for the loan. Back when Matt was in his care-free 20-something job-less phase, he made a string of poor financial choices. This particular phase didn't last very long, but it had some strong and long-term effects. We've always known it was there, just sort of avoided it because it was far too overwhelming to deal with.

Last spring I attended a first time home buyer's class. When we began working with a mortgage broker who helped teach the class, it felt pretty hopeless that this was anywhere in our near future, but figured it wouldn't hurt to find out what he had to say. We shared with him our credit reports and after he reviewed it all, the news was good and bad. The good news was, we could buy a house! We made enough money and would qualify for a loan even with a really, really poor credit score (yay for FHA!). The bad news, which was made very clear to us, was that we needed to pay off all of the bad debt we had. Okay, how in the world could we even begin to do that?

Well, we had been starting to pay things off since late 2006, so that was a start. At that time I had just read Dave Ramsey's Total Money Makeover and set up our little "snowball" spreadsheet (which is a way to order your debts so that you can more effectively pay them off). It was sobering, but every month we threw a few hundred dollars at it, little by little things started to get paid off and ceremoniously crossed off of the spreadsheet. Then came the day we met with the mortgage guy. He recommended a law firm that would help us clean up Matt's credit report even more. We worked closely with them while we continued to put even more money towards our debt.

So that brings me to today. When the mortgage guy came he showed us Matt's credit report. His score had gone up well over 100 points since we began this process. We have one thing left. One thing, it's a pretty big one, but that's IT. Once that is paid off we will have our pre-approval letter in hand and will start looking for our house.

Mr. Mortgage Guy said we had the most complicated profile of any people he had worked with, but that we had worked harder than other people have to fix it. That he had seen other people give up, convinced that they would never fix it. That he had used us as an example of where you can get with a little hard work.

Needless to say, we're really proud of the work we've done. Matt and I like to joke that with his money-earning abilities and my ability to work a budget, we'll be okay. Certainly if our roles were reversed, we'd be screwed!

We think we'll be in a house by June. We hope so. I want to be in one before Iris's birthday on June 18th. That's sort of best-case scenario, though, which we try not to put too much weight in to since nothing about this process has really gone as quickly as we would have hoped.

I am mostly sharing this story because I hope it inspires someone else. We can hardly believe we were able to accomplish what we have. It's pretty exciting :)

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