i have about 40K in debt. my credit is not great. I want to buy a house. Is that possible?

First, find out what your credit scores are on all three bureaus. 620 and below is considered poor, but there are lenders who can go with scores in the upper 500s. You'll pay more for your mortgage, but not 25%. A high rate today is about 8% for crummy credit.

Now figure out your monthly gross income. Add up all your monthly payments. For credit cards, use the minimum required payment. For everything else that's consumer debt, use the actual payment. If you have an AMEX card, use 5% of the balanc. Don't include things like food, medicine, clothes, utilities...only things that show up on a credit report is considered consumer debt. Divide the total monthly payments by the monthly gross. That figure is you debt-to-income ratio. If it's 40% or less, you're on the right track. If it's more than that, your credit has to be very good, and over about 50% is just too much.

Now, where are you going to get the money for closing costs? Even if you can get 100% financing so you don't need a downpayment, you're going to have to pay for an appraisal, title insurance, etc. Figure $2500 to $4000, the more expensive the home the more the closing costs. If you're in HI, AK or CA, you're closing costs will be higher than other states. I'm assuming you're in the US.

How about reserves? Most banks will want to see a couple months reserves. That means they want to be sure you can access enough cash to make a couple payments, including taxes, insurance, and mortgage insurance.

About the bankruptcy. Most banks require that it was declared at least 2 years ago and that it is discharged. Some want the discharge to be 2 years ago. Do you need your wife's income to qualify? If not, you may be better off without her on the application, but you can still put her on the warranty deed. She wouldn't be responsible for the loan, but would still be an owner of the house. There would be some docs for her to sign at closing to acknowledge that property she has an interest in is being used as collateral.

Possible...maybe. Call a few lenders to see what they say about bankruptcy and debt ratios. Expect to pay higher interest with a high debt ratio or a BK on your credit report.

Better...work on that debt and save some dough. Figure out which balance you can pay off the fastest and concentrate on the while making timely minimum payments of the others. Once that's gone, concentrate on another. If the balances are all about the same, start with the one that has the highest interest. MOST IMPORTANT -- STOP CHARGING. Buy what you can pay for only. Figure out how to do without stuff or use stuff you already have. Sell stuff you don't use at a big garage sale, then pay down the credit cards with the proceeds. Work a second job for a while to get those cards under control. Always ALWAYS pay on time, even if it means you can't buy the groceries. Eat mac n cheese if you have to.

Owning a home isn't cheap. There are a lot of other expenses beyond the mortgage payment. If you have no reserve, what do you do when the roof leaks? When the hot water heater conks out? You're better off renting until you can handle unexpected expenses.

Many of the previous answers were right -- now is a hard time to get banks to look at riskier loans. But now is also the time to start rebuilding your credit and saving up for a downpayment. First, make a one year plan: move in with family if possible (otherwise, rent a cheaper place), get bills paid on time and consider a consolidation loan to make the interest rate lower. Sell what you don't want or won't need in the new house. Take on more work, and spend very little -- it is only for a year. Second, consider alternatives to a traditional house, at least as your first home purchase eg. mobile, duplex shared with family members. Really think about buying something with 2 or more units and living in one -- the bank will look at the rent from the other units when calculating the income. In your one year plan, you should build a relationship with a good realtor, as well as let friends and family know you are looking to buy. It may be possible to buy a home or small apartment building by taking over payments or doing a private mortgage. You may want to think about buying a cottage as your first home (assuming you also downsize to an apartment) -- it will be a place of your own that can be sold or re-mortgaged when it comes time to buy a house, and can be rented out when you are not using it.

We bought our house as a set of 2 flats -- since it had been an older home converted into apartments, we were able to easily turn it into a single-family home when we no longer needed the other rent to keep us going.

If you don't plan to make this dream a reality, you won't be able to do what is necessary to buy your own home.

Home ownership is wonderful, and with the right financial moves, it can be attainable for almost anyone. Given your present situation though, I would hold off an buying a home. Seeing as you are unable to come up with at least a 10 percent down payment, and both you and your wife have bad credit, this is not a favorable time to buy a home. If you can even find a bank that will give you a loan (loans are going to be hard to come by for yourself given your current financial situation due to the sub-prime mortgage debacle going on in this country.) you will receive a horrible interest rate*

*Just a word of caution, many banks will offer an ARM mortgage with what seems like favorable conditions. They will give you a low "teaser" rate with the promise that you can eventually refinance. If you are unable to refinance (which happens quite a bit despite a bank's promise that it won't become an issue) you will be stuck with an unmanageable payment they may lead to foreclosure.

However, this is not to say that you can never achieve your dream of home ownership. My suggestion to you is that you work on repairing your credit score, and paying off as much credit card debt as you can possibly manage. You to see a debt counselor to figure out a reasonable budget as well as possibly consolidating your debt so you can make a single payment (you definitely need to talk to someone more in detail about this option though). If at all possible move to a place with cheaper rent. Banks will typically only give a loan if your debt to income ratio is at a certain level so definitely get the consumer debt down. Credit card debt is the worst possible kind of debt that you can have so it is imparative that you get this under control as soon as possible.

Don't be rash. Pay off your debt first - that's a huge amount and should be your first priority.

Yes, you can buy a house with some debt, but no one is going to give you a favorable mortage with so much outstanding debt and a poor credit history (you're married, so your wife's poor history is now YOUR poor history).

Get a handle on your current commitments before you tackle a new one.

Wow. I don't know.

This is a really bad time for banks to take on any kind of risky loans. You may need to wait for the crisis to rebound. Right now - I'd say they'd turn you down just because of the foreclosure rate and the nervous market.

Maybe you could do a private Article of Agreement? Some sellers are pretty desperate to unload their homes.

Highly unlikey since the current trend is that lenders are being super conservative, due to all the bankrupsies across the country. Granted, the problem is partially due to their own greed (loaning money to people who shouldn't have been approved in the first place). So with your history it's unlikely you'd qualify especially with nothing set aside for a down payment.

1-you should not see a house as an investment unless it gives you revenue. example your payment with tax and expenses is $2000 and you rent it for 2500. if it does not provide cash into your pocket it's a liability. 2-I sugest educating yourself about stocks and waiting untill housing market stabilizes then you buy the house, because now you might buy at 250k and next year might be worth 200k.

its possible but not stable. If you are living paycheck to paycheck owning might not be a good idea...when you own you just don't pay mortgage ONLY, you pay property taxes, water, waste, insurance, and if anything breaks you gotta fix it. Also you mention you have 2 children and children are expensive. All in all your situation seems risky with way too many factors that can cause a lot of money.

It seems better to move in to a cheaper place and start saving up.

anything is possible.

with bad credit and debt if you can get a loan you'll be paying about 25% interest or more.

can you get a cheaaper rent and start paying off your debt?

maybe a second job that only goes to paying debt.

You're better off than me and I have less debt than you. I have $25,000 in student loans and no degree to show for it. I can't get a loan for a house becasue I have unsecured outstanding loans. This sucks. I'm right there with ya buddy!