This answer is for your husband,
You might be able to get financing with less than perfect credit but you will pay a higher interest rate for the mortgage product.
You may want to pay the debt or not pay the debt. If the collection agency is still calling you and pursuing you and depending on the amount of the debt you may want to pay it off. If the collection agency takes you to court to obtain a deficiency judgment against you for the debt owed then they would place liens on other property, garnish wages, etc. If the statue of limitations has not expired you might want to consider paying the debt.
If you pay the debt, it will probably effect your credit score negatively because the negative trade line is older and counts less on your credit profile. Therefore you may not want to pay your debt.
The appropriate steps would be to actually pay the debt because you owe the money. You can ask the collection agency in exchange for paying them to remove the late payments off your credit report. This way you handle your obligations and get the credit in good standing. If the collection agency is unwilling to remove the late payments, etc off your credit reports then you might consider credit repair services to assist in navigating you through the credit repair process.
Hannah Fliegel, FICO Pro
The Credit Repair Expert