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Our House Adventure :: Credit, Debt, and Loans

If you want to make your head spin, go visit your local loan officer. You’ll talk about percentages, interest, numbers, payments, and maybe even like them when you leave. Last night, Jimmy and I met with Umpqua (the world’s best bank) to talk about our roadmap to buying our first home in Portland. We left the meeting feeling super optimistic that our savings plan is looking good, and our loan officer thinks we’ll have no issues getting pre-approved.

When we got home, we bought our credit scores … okay, I am taking a tangent here!! If you think you can get your credit score for free, you’re wrong!! The ‘free’ reports are just that … they are reports, not your score. We paid $24 and got both reports and scores. Nothing was really surprising, and we could immediately see where we can improve (paying down 3 credit cards to reflect a 33% balance (instead of the 45% balance that they are currently carrying)).

You want to know what the real slap in the face was?? Our $113,000 of college debt. Even with it, our scores are both above 700, but still … ONE HUNDRED AND THIRTEEN THOUSAND DOLLARS! I am so thankful for my college experience, but this just seems like a mountain too big to climb. Is there such thing as a student loan fairy? For some reason, a 30 year mortgage isn’t intimidating at all … but these loans, they make me want to crawl into a little ball and cry.

This morning, I feel like we’re at this weird place. We don’t really need a new home right now (it’s currently just the two of us), and I keep wondering if we should wait a year … pay off half of the debt, instead of saving for a down payment, and then focus on the house later. Even if we did this … we’d still have $55,000 student loan debt staring us in the face. Our friends paid off $70,000 of student loan debt off in a year, and they feel so free now … I would love to know what that’s like!! With all of that said, the truth is, we really want a house. Apartment living has been fun for the past year, but I’m tired of using our bedroom as a storage space … I’m tired of not having room for more than 2 other people for dinner … I’m tired of landlords … I’m tired of not being able to really customize our space. Furthermore, as we creep closer to 30, babies are on the horizon, and we definitely couldn’t have a baby in this old, drafty apartment.

I know we’re going to move forward with the house, and we’ll continue paying the loans off over time. I am so excited for this adventure … I just wish college wasn’t so freaking expensive! I am sure next year, when we’re sitting in our new home, all of this will seem so silly … but for now, I can’t wait to document our journey here.

I thought it might be helpful for other’s who are in our shoes to list some of our goals for January … we plan to purchase in May or June, so right now, we’re about 6 months away from closing:

  • Continue saving. We plan to save 15-20% of our down payment each month. Our loan officer has encouraged us to put 5% down on the house (to get the best rate we can), so this is a big goal, but totally doable if we stick to our budget.
  • Pay down our 3 credit cards. The lenders don’t care about the amount … they care about the percentage. So, one of our cards only has a $2,000, but we’re using $900 of that. $900 doesn’t seem like a lot at all, but to be within the 33% range they want to see, the balance needs to be around $650 or lower.
  • Don’t apply for any new credit. This is an easy one. Our lender reminded us that we need to be a on a major new-credit freeze until we’re approved for our loan. They don’t want to see people who are credit-crazy.
  • Pay off our smallest college loan. One of J’s loans is under $2,000, and we plan on paying it off. Sure, he has about 15 other loans, but getting that one off of the table will show that we’re serious about taking care of our debt and saving for our home.
  • Starting paying more attention to the market in Portland. We’ve been looking at Zillow a few times per week, and it’s been so much fun picking our favorite homes. After our meeting last night, we know what we’ll likely be approved for, so now, we can refine our searches & really keep an eye on properties we’re interested in.
  • Do our 2012 taxes. Being self-employed means I need 2 years of proof that my business is profitable. 2012 was a big year for me, and we definitely want it considered when we’re getting pre-approved (if they used 2010 & 2011, we’d have a really hard time getting a loan since Jimmy was in school, and my business was just starting to grow).
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