I got my first credit card this month. How can I build credit fast for a good rate on a home loan?
May 25th, 2010 by admin
I’m 20, a student, I have no wife or kids. I want to buy a home for personal reasons, please just answer the question. Is there any way to get down payment assistance? Where can I get the best rate on a loan? I am currently making about $15k a year of disposable income working part time. My only living expense right now is food. I want to get a house in no later than 6 months.
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You’ll need a longer period of credit rating to get a 90% loan. One credit card ain’t gonna work!
The market will be depressed for at least another year, save as much as possible in that time. Don’t buy on credit more than you need or can use. Pay double minimum payments, and ALWAYs be a few days ahead of the due date.
Most lenders are looking for at least 2 years of solid repayment history for home loans. It is possible…you can find a lender that will approve you but a higher rate of interest. If you just received your first credit card, use it sparingly. Meaning use it every month and pay it off entirely at the end of the month. Depending on the state that you live in, you may be able to find a home in which your income could support. Keep in mind…your monthly “housing” expenses, including taxes, mortgage, and insurance should be less than 31% of your monthly income.
I don’t think that you can build credit fast. The credit industry looks at several things. How much you owe, how much you make, how much of your limit do you borrow up to, how long you have paid back faithfully etc. Here is what I suggest you do. First of all use the card to carry a balance. Don’t pay it off every month. Charge like 100.00 for stuff you use all the time but only pay off 85.00 that way you show that you make payments all the time, on time, and never just the minimum. You don’t get credit for paying stuff off completely. Also continue to save. Talk to a mortgage broker about amending your last years tax return for additional tax incentives. I bought my house when I was 23. I was not in debt and did not have a super long credit history. I just did not have any bad history. Credit scores drop when you borrow as much as you can. For example if you have a credit line of 8000.00 and you charge 7800.00 that shows immaturity and instability because it sends the message that you are in need and will charge up to whatever someone offers you. Good luck.
Fast?…. means at least 2 years of proper use of your line of credit.
The highest score you can achieve with a credit card is by only using 10% of it’s limit in a billing cycle and then paying off completely every month when the bill comes.
About the house… great that you have 2K down and intend to use the 8K from tax credit but… you have to have a decent income and 15K a year translates into a house worth 45K max. (3 times yearly gross income). You will also need around 3% for closing cost, etc.
Talk to a bank and get pre-approved for a mortgage. They will be able to tell you what you can afford exactly.
If this brand new credit card is your only tradeline, you don’t even have a credit score yet and won’t until that card is used for at least 6 months. Even if you had used the card for a year, you would not have sufficient credit history to qualify for a home mortgage, especially with so little cash for downpayment — you don’t get that $8K until you file your 2009 income taxes.
Besides your credit history, other things mortgage companies look at is employment history (at least 2 years). A $15K a year part time job won’t be enough.
If you have not yet established a credit record for yourself or you are in the process of rebuilding your credit, getting a credit card can greatly help you. The fact is, credit cards are one of the best ways to build a credit history and increase your credit worthiness. You can build credit in many ways such as having a department store credit card, or taking out a small loan at a bank and paying it off, but having a credit card is actually a far more effective way to build your credit. The simple reason for this is that you can use a credit card to pay for all your regular and ordinary expenses for which you might be paying cash, and in the process, you are literally building your credit record.
1)Know which accounts are shown on your credit report.
Step 2
Request a copy of your credit report at least once a year.
Step 3
Check that the information shown on your report is accurate.
Step 4
Pay all of your bills on time. You don’t need to pay the entire balance each month, but make at least the minimum payment promptly.
Step 5
Avoid going over the credit limit on your credit card account. Some credit card companies allow you to do this as a courtesy, but it can reflect poorly on your ability to handle your account.
Step 6
Cancel credit cards you aren’t using or don’t anticipate using.
For more to know on benefits of credit cards and different types then i suggest you to visit this site
You are going to need a cosigner.
First, how much house are you thinking of buying?
With an income (part time only?) of 15k a year, you will only qualify for 45k, unless you have a decent down payment. A lot of lenders will not touch a mortgage that is lower than 50k, it just isn’t worth their time.
As for credit history, you aren’t going to have enough credit history in 6 mos to show as you being worthy for a mortgage. There is a difference between getting a 50k or more mortgage and having a credit card with a limit of a few hundred or a couple thousand. ( you didn’t mention what your credit limit was )
Even though your only expense now is food, when you buy a house, you have to add in lawn care, utilities, things that need to be fixed or maintained, insurance. Houses can be money pits! There is always something to work on or fix. Also, you gotta have appliances, furniture etc.
The 8k tax credit in most cases cannot be used as the down payment. Google to find out if your state will let you take a loan against the 8k ( although I doubt you would get the 8k, because your income will only allow you to buy at most a 45 to 50k house which means your tax rebate would only be 5k, not 8k— the rebate is up to 8k, or 10% of the house price) I know some states are letting first time buyers use the rebate as a loan, Missouri comes to mind, but you would have to ask a real estate agent or your CPA if your state participates in this.
You need to buy and CLOSE escrow (meaning you need to have the keys in your hot little hands) no later than December 1, 2009.
Best bet, is to talk to a lender and tell them your situation and see where you stand.
I wouldn’t be surprised if they either tell you you need full time employment for 2 years, a clean credit history for 2 years, a bigger down payment, or a cosigner.