This week for Gettin’ Guesty we have the wonderful and smart Michelle Mccarty. In her essay she discusses “Good” vs. “Bad” debt and about how her and her husband are making their way to their goal of home ownership.

Michelle’s blog is YoYo’s House.

Please help me welcome Michelle!

I am a born native Texan, aspiring to one day own my own home.  I’ve rented for the past six years and now I’m working on purchasing my first home with my husband.  In this article I’m going to discuss the process of how we are working on getting approved for a home loan and what we’ve learned on the importance of our debt to income for the home loan.  I’m not an expert in this; I simply want to share our story.  If there is any piece of our puzzle that you can use during any loan process, then please feel free to use this information.

We both began looking into purchasing our first home two years ago.  We began talking to loan officers and quickly learned the least amount of debt we have to our income the better the percentage of the loan we will receive.  We’ve always had our bills in some sort of list form, so when the first loan officer told us to do this and provide to him, this was the easy part.

The challenging part for us was determining what good debt is and what bad debt is.  For example; someone told us car loans and college school loans were ok debt because they were a secured debt, but on the other hand I was told by someone totally different that these loans are bad debt.  I did a lot of research online and read mixed articles pertaining to this topic.  My overall thought about my car loan and both our school loans is it counts as our overall debt to income, so to me it doesn’t matter if it’s good or bad debt.

The first thing we did was pay off all retail company credit cards.  A retail credit card is definitely a bad debt, but we use them to gain points.  My advice on getting a retail card for points is you really must have a great goal toward using your hard earned points.  The hardest part is keeping them paid off and not using them before someone pulls our credit reports!  Now we are paying off long term credit cards, non-retail related.  We are in the process of saving for a down payment for a house, so paying off these credit cards is a bit harder in the time framewe have.  Eventually they will be paid off, because we can successfully say we have not charged on these cards in about 4 years.

Overall, the most important thing I’ve learned during this process is to not live above our means.  We should use our income to pay our living expenses and only get a home loan that we can afford.   I believe this is the biggest piece to the puzzle for us to successfully achieve our goal.

Michelle Mccarty ● THANK YOU ● for being a part of And Then We Saved!