Buying a house with a lot of credit card debt?

Question

My wife and I have about $15,000 in credit card debt.

We are wanting to buy a house that is about 25% monthly of our gross income, so we feel we can afford it.

However, with our credit card debt, we are paying about $350/month which pushes us into a tighter situation.

I feel that it will take us years to try to pay off this debt. I don't want to rent for years.

So I am in situation. Buy and hope we make it. Or rent for the rest of my natural born life.

If we buy a house, and for some reason had to declare bankruptcy 4 or 5 years in, could we keep the house do you think?

Answer 1

Do you have any reason to expect that you'll qualify for a mortgage, if you decide to buy?  In particular, how much have you saved up for a down payment?  Zero down payment loans are pretty much a thing of the past, so you had better bring a substantial amount of money to the closing.  But I question just how much cash you have available.  After all, if you are up to your ears in credit card debt, there's usually not much left over from your monthly income to save.

So I would have to say that you strike me as not quite ready to buy a house.  People that are ready to buy shouldn't have to worry about possible bankruptcy in the next 4-5 years.  The banks also see your shaky finances and are reluctant to loan money to poor credit risks, especially in today's climate.

Pay down your debt and save for a down payment.  Then you'll be ready to buy.

Answer 2

I think you are setting yourself up for failure. Not because of your situation but because of your attitude. Thinking about declaring bankruptcy before you even buy a house is about as pessimistic as it gets. I think you should learn to budget yourself and understand your money a little better before you jump into anything. The first step would be to stop using credit. Then to set up a $1000 emergency fund. Then to use every extra penny paying off debt. Line all debts from smallest to largest and pay the minimums on all except the smallest. On that one put every extra penny until it is paid off. Then move to the second then third and so on. Once you get your spending habits under control and discipline your money behavior, you will never fear losing your house. If you want to get to this point sooner than later start by canceling or reducing luxuries such as large cell phone packages or cable, then by selling anything unnecessary. Perhaps your car payment is too high? Sell it and get a more affordable one. Then take on an extra shift at work. Get a second job. Do odd jobs around the neighborhood (like mowing yards.) If you would actually do all this, within 1-2 years you will be close to debt-free if not already debt-free. If you don't chances are you will be just another statistic of foreclosures and your credit will be ruined. Then you will have to wait years to finally have your own home.

Here is a site about bankruptcy and houses. Chances are you would not be able to afford to keep it after such a short time but read for yourself: http://bankruptcy-law.freeadvice.com/con...

P.S. Don't say all young families are in debt. 26 years-old and my only debt is $1,500 on a truck which will be paid off on August 29. I start building my house the beginning of September!