Question About Bad Credit Mortgage?

I have several questions about buying a home with bad credit. Before I do, let me give you some information about me to help you better answer the questions.



I'm hoping to marry my current girlfriend sometime in the future - maybe in a year or so, God willing. We would probably rent an apartment for a year or two after getting married, then would like to buy a home.



The good news is that her credit is excellent. My income is about $32,000 a year, and her's is about $28,000 per year, so our combined income would be about $60,000, assuming nothing changes between now and then (but hopefully it will change for the better ;).



The bad news is that my credit is bad - I had a bankruptsy a few years ago, and my credit score is just over 600, which is pretty dismal. I understand that there are ways to improve your credit score (any tips would be appreciated), but I'm just trying to get an idea of what kind of interest rate we might receive on a mortgage based on our current financial picture. I don't understand how the bank would determine our interest rate considering her good credit and my bad credit. Based on my credit score, I would think the bank would give me a rate of about 8.5% or higher, if I could even qualify for a loan at all, but based on her good credit, my guess the interest rate would be about 5.5%. My guess is that we could probably afford a home in the $110,000 to $140,000 price range.



I'm very new to all of this, so I understand that my estimates may be off, but any feedback or advice you can give would be appreciated. This would be a few years away, but I'd like to do as much as I can in the next couple of years to improve my credit, and to plan for this so we can make the best possible decision when that times comes to buy a house.



Thanks to all that respond!Question About Bad Credit Mortgage?
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If you are not looking to buy a home for another two or three years, the interest rates picture can change drastically between now and then. Just three years ago interest rates were 2-3 percent higher than they are now. More than likely interest rates will go up between now and then.



Right now you should be able to qualify for a mortgage with a score of 620. My best friend purchased a home last May with a credit score about that range and got slightly under 5% interest (which was great for that time). My husband and I purchased our home last November with credit scores in the 720s-740s and got a 5% interest rate. We both purchased homes in the $100K range. The interest rate you get will vary widely depending on when you purchase, especially as rates fluctuate daily.



As for helping your credit, the best thing you can do is open a credit card with a small limit. Charge a few things on it every month, and pay the minimum amount on time for a few months, then pay off the amount. You can carry a balance if you wish, for as long as you wish, and it will keep your credit good as long as you pay the minimum amount on time every single month.



Most lenders are also looking for different types of credit. Not only credit cards, but auto loans, student loans, etc. As long as you are making your minimum payments on time every single month your credit score will go up.



You can also boost your credit scores by keeping your balances to less than 30% of your available credit. For example, if you have a credit card with a $500 limit and another credit card with a $5000 limit, you want to keep your balances at or below $1650 (which is 30% of $5500). Paying down debt will help your score a lot.
Go to WalMart and get a credit card with whatever limit they give you. Buy something with the card every time you shop, and take the cash you would have used and make a payment. Do this at the customer service window immediately after you check out. That way there never is an outstanding balance.



In a few months, they will increase your limit. Keep it up. Then get a Sears card and do the same thing. Sears interest rates are killers, so ALWAYS make the payment immediately !



A couple of years of this, even adding a Master Card or Visa should bring your rating up a bunch.



On buying your home, pick a place you want to live in for a long time. Keep the payments to what is affordable even if one of you goes to unemployment insurance. Save every dime you can after buying for the repairs and maintenance that occurs. Make automatic payments, so there is NEVER a late payment on the mortgage. Then, after 5 years or so, you should see a good equity build. Don't get into a 40 year, Variable, or Interest only loan and avoid a 2nd mortgage if possible.



The idea isn't to use the home as a cash cow, but as a security for your future. The only people who seem to enjoy retirement are those without a mortgage !



Good luck