Question about getting a new mortgage, bad credit

I am hoping in 2 to 3 years to sell my house (depends on how long it takes to clean up some of our credit) and upgrade to a bigger newer house. We have owned this house for 8 years. However, over the summer and into the fall we ran into trouble. Big medical bills. Then a ton of crap happening at once that broke down in the house. This led us to default on most of our credit cards, etc. Our house actually went into foreclosure in January 2011. I was able to work out a repayment plan. Everything will be ok as of April 28th with the house. Our mortgage will revert back to normal and be reinstated. The foreclosure will be gone. We started the repayment plan in January. All of our big limit cards, I have worked out repayment plans on at 0% or for a low interest rate of 5%. Some credit cards, went into collections. I negotiated a paid in full/settled in full on some of them. The others I am holding out for a PFD as they are low limits less than 1k. So that is where we are at now. So what do I need to do to get a mortgage in a couple of years. If I can't get the collections deleted off our credit report, will we be able to get a mortgage with them reporting paid? We had great credit until we ran into a multitude of problems (started in Feb 08, we didn't default till this past summer/fall). It was one thing after another. It just all collapsed in the fall. We have a long history of credit (some cards for 15 years!). I plan to try and get the paid collections removed. Do GW letters to get lates removed. If I remember, in 2 years, the lates won't have too much of an impact on scores. The collections will. Would it be possible to explain WHY we fell to where we did at the time? It's kind of obvious in our credit history. All payments made on time and then boom, default. Then payments being made again. I don't have a need for immediate credit. I do want to upgrade into a bigger house and yard in 2 to 3 years. In 2 to 3 years, most of our debt, if not all of our debt will be paid off. So we will have a great DTI ratio. Also, we are eligible for a VA loan. We used a Farm loan program to get this house. We refinanced it under a conventional loan a few years ago. We are still eligible to use dh's VA loan status. We would also be able to use a FHA loan to. I know that VA loans are more forgiving on credit scores. Hope my questions and rambling makes sense. by feeeei55 from Bonita Springs, Florida. Apr 1st 2011 Reply