Buying A Home

[Danielle1984]

 I wasnt very responisble when I was younger with paying bills on time or at all, and I have paid all the back bills off but 2 that will be paid at the beginning of the year. And I just got  married and my husband has no credit but we are sick of renting and want to buy in this market so our big question is how long will it take for my credit score to improve enough to buy a home and what to do for my husband to establish credit so banks will actually look at us. Thank you

[Adam Bray-Ali]

The short answer is that it will take 1-2 years of focused effort to improve your credit. 

By being aware of your situation and beginning to think about this you are taking a great first step and now you need to focus on knocking off any small bills that are causing negative reports and then once they are cleared, actively working to improve your scores. 

You may find that a service like Mint.com (quicken online) helps you with a budget and savings goals.  keep in mind that you will most likely NOT find a shortcut to improving your credit scores and finances.  It takes diligence, focus and making the decision to live within your means. 

There are a ton of websites offering information and this one at Bankrate seems as good as any. 

http://www.bankrate.com/finance/credit-debt/tips-for-boosting-your-credit-score-1.aspx

[Michael Hickerson]

If  buying NOW is your goal, consult one of our fine Bank Of America Loan Officers regarding FHA. I suspect if all your bills are paid your score may have improved significantly already. FHA has some liberal policies that allow you to obtain a loan you can afford on a property today. Certainly, if we have learned from past cycles, buying at a low point of both values and interest rates is preferable to buying later. If you are already signed up with ZIP, there's a link to speak to a lender right there on your home page. Look for the Bank of America Logo, it's on the right near the bottom of the page.  Also, if your husband LITERALLY has no credit score, you can use alternative methods to establish one, a good loan officer knows all aboutthese methods. Good luck!

[LeslieMathis]

Hey if you go with a FHA loan, they will put something on it called PMI insurance that will jack up the payment by a good deal of $$ each month.  ANything financed over 80% loan to vlaue must carry this insurance on an FHA.  So, your good payment turns into higher than you expected.  If you wish to contact me email me at lesliemathismentor@yahoo.com.

[LoansbyJW]

FHA insured loans must have an Up Front Mortgage Insurance Premium (UFMIP) paid plus Monthly Mortgage Insurance (MMI) no matter what the loan to value for up to 5 years. A 15 year fixed FHA insured loan for now does not have MMI if you put 10% down, but that changes in April.

Depending on the State you purchase in, when using an FHA insured loan your non-borrowing spouses credit will impact your ability to qualify. The State must have restrictive Community Property laws (California for example) If you purchase with a Conventional loan (5% down or more) your spouses weak credit will not be considered.

Thanks for reading,

LoansbyJW

[Redvelvet215]

My sister was in a similiar situation so she end up doing rent to own on her house. She was able to put $1,200 down and pay $500 a month. Each time pay her month balance on time it put a positive rating on her credit report. I know it is still renting but at the end you will have your credit some what decent depending on how you are keeping up with your other bills and you will own your home at the end.

[Adam Bray-Ali]

@redvelvet.

Can you explain how paying her rent on time was able to influence your sister's credit rating?  I'm not sure I understand how that worked.

[LoansbyJW]

Lenders can create "Alternative Credit" (AC) from 12 months paid rent, insurance, cell phone bills, etc. That alternative credit helps an Underwriter with their decision process whenever there is limited or poor credit. For example if a borrower has 5 tradelines and 1 is bad, that's 20% of their credit gone sour. With additional credit information that percentage of bad credit shrinks with each line that can be verified.

Alternative credit does not impact a borrowers FICO score. The score models do not retain that kind of data when lenders structure the AC profile. A 620 FICO score borrowers, 5 tradelines, 1 negative represents quite a risk. That same borrower profile with 9 credit lines instead of 5 is a much better profile that Underwriters prefer to approve.

Thanks for reading,

LoansbyJW

[pbradshaw]

I would highly advise speaking with a good Lender.  I have seen many times where someone with credit issures  can get them resolved fairly quickly by following the Lenders advise.

[Wayne King]

Do you have any cash for a down payment? You or your agent could be looking for someone who would seller-finance their property. Seller financing does not have any formal guidelines to follow - only what is agreed to between the buyer and the seller.

You can start establishing credit by getting a secured credit card(3 cards is even better). Don't abuse them. Use them as often as you can to pay for things that you'd usually pay cash for or write a check. You can use your secured card(s) for groceries, to pay some utility bills, cell phone bills, car insurance, DMV fees, gas, etc. DON'T SPEND MORE THAN YOU CAN AFFORD!!! Then pay them off every month or maintain a small balance  of less than 1/3 of your credit limit, at most. Ideally - you want to establish at least three good trade lines. A recent - paid as agreed with no lates car loan would be nice.

Sometimes you have to look at paying some interest as part of the cost of establishing credit. If, for example, you were in the market for a used car - and you could pay cash for it - it could be a good idea to take out a loan and pay it off as per the agreement, or early. But, in any case, keep the loan for at least six months. Even at 12-18% interest - the amount of money you'd pay for a six month loan would be small compared to the value it can have in raising your credit score.

Credit scores are based of a blend of several different criteria - the number of accounts you have, the mix of the different types of credit, the length of time you have had established credit accounts, and the percentage of utilization of your available credit.

You don't have to make a lot of money to have a good credit score. And, certainly, there are people who make a lot of money who have very bad credit. It's all in how you manage your money and how you play the game. And, it is a game. Just learn a few simple rules and you'd be amazed at how fast you can establish(re-establish) a credit score high enough for a home loan.

Check out http://www.720creditscore.com/. They have great information on how to build a winning credit profile. The book: 7 Steps to a 720 Credit Score; explains the rules of the credit game.