I would like to start the process of buying my first home...

[BEELZEBOB]

But as a 29 year old manchild, I dont know where to start.[pick-me]

My current credit score is a 698. I would like to build it to at least 720 in the next 6 months while saving up for a wedding and down payment.

My plan to build credit would be to open up an American Express card, and just use it as I do with cash and debit cards, and just pay in full every month. (Is that a sound plan?)

Once I have built up another 20 - 30 points, I was going to try and get pre approved for a $250-$300K fixed loan. Where would be the best place to start?

I am hoping I can get a good 15 or 20 year fixed mortgage.

Can I ask for the kindness of one of you "adults" to kick me in the right direction?

[newracer]

Using a CC and paying off the entire amount each month does not build your credit.

[BEELZEBOB]

This is why I ask.

What would be the most effective way to build my credit up another 20-30 points?

My family is not the most money wise... My lady and I have little experience with finances beyond living costs and basic savings.

[Scogin]

One of the biggest factors for credit score is average length of credit. If you open a new card or two it is going to shorten the average and bring down your credit score.

Another major factor is your percentage of credit utilization. What is the percent of money you owe versus your total credit limit?

Do you have any collection accounts or negatives on your credit report?

I just learned all about this as I was cleaning up my credit score.

[BushMasterBoy]

I'd buy something less than $200K. Lots of foreclosures the banks are trying to get off their books. If you are a veteran, it is easy to get a VA backed mortgage. Alot of houses require a 20% down now. I paid $130K for my house in 2006. Brand new house on a acre. Last month a house on the same block, same size and age was listed for $89K. If I lived in the metro area, I'd buy a house west in the mountains, with a little land. Do you bank with a bank or a credit union? Ask them about any foreclosures they have on their books. $150K house with 20% down is $30k.
I'd buy a house where you can easily meet the payment. Being foreclosed upon can wreck your credit. As for building credit rating, make sure any defaulted credit cards and other bills outstanding get paid off.

[al_g]

First off, a pre-approval is pretty much worthless, you need to get pre-qualified for a loan. My fiancée and I close on our new house next week so this is all fresh in my mind, though it isn't the first house for either of us.

Couple things on your credit score, first if you don't know there are three consumer reporting agencies and for a mortgage the middle score of the three will be used. So make sure to check all three. Next, you mention saving up for a wedding, if you plan to use your fiancée’s income when buying the house her credit scores also matter. In this case, the loan company uses the lower of the two middle scores. If you posted your middle score, you are already in good shape and another 20-30 points may not even get you a lower interest rate. You really need to talk to a loan officer, we are working with Mitch Friedman at Citywide, and he has been great.

I didn't see any mention of a down payment and those are a huge deal these days. I bought my first house in 2005 before the crash and as a new build only put down 1k plus about another 5k in various first time buyer credits. If you don't put down at least 20% you will have to pay PMI, which is insurance to the lender. That can add anywhere from $100 to $200 and maybe more depending on all the factors to your monthly payment. Bigger down payment also means easier approval.

The last big issue that lenders look at is your debt to income ratio. Our loan had an absolute max of 45% debt to income including the new mortage payment. In our case we have turned the house I bought into a rental and are selling her house that we live at now. With the two mortgages we had to go through some hoops in order to have the rental income counted, didn't even take 1/3 of it to drop us below the 45%. If you have car payments, this can be a big hit.

In addition, when looking for a house don't forget to find out if there is a HOA and if so how much they charge a month.

Feel free to PM me or post questions here and I can answer from my recent personal experience.

[ChunkyMonkey]

But as a 29 year old manchild, I dont know where to start.[pick-me]

My current credit score is a 698. I would like to build it to at least 720 in the next 6 months while saving up for a wedding and down payment.

My plan to build credit would be to open up an American Express card, and just use it as I do with cash and debit cards, and just pay in full every month. (Is that a sound plan?)

Once I have built up another 20 - 30 points, I was going to try and get pre approved for a $250-$300K fixed loan. Where would be the best place to start?

I am hoping I can get a good 15 or 20 year fixed mortgage.

Can I ask for the kindness of one of you "adults" to kick me in the right direction?

Opening another unsecured trade line will only drop your credit score.

There are 3 kind of trade line... mortgage, installment and revolving.
Mortgage typically is against an appreciating asset and will increase your credit worthiness within months
Installment may not be against an appreciating asset but at least there is collateral and on a fixed term. This also will increase your credit worthiness.
Revolving however is unsecured with adjustable rate.. .this will only hurt your credit unless it shows 2 years or longer low balance and payment history.

The rule of thumb to qualify for a home loan is...
1. 2 years of steady job (conventional), or real good reason why you only have been in the current job for 1 month and make tons of money (FHA). <-- I had a lottery winner w/ annuity payment purchasing a home couple months after the 'instant' income increase.
2. Well sourced and seasoned reserve fund, or in FHA, sourced family gift.
3. Descent credit (FHA relies on many factors, I have seen very low credit score borrower got approved due to compensating asset/job over bad credit). Min score for FHA is right around 640 mid, Conventional is 680. At this scores you will get 3.25% rate/ 3.5% APR on today's 20 or 30 year fixed. 2.75% on 15 years.

FHA is rising its PMI to 1.35 on April 1. LPMI conventional is looking better and better.

Good luck with your first home, pm me with any question. I have been doing loan for over a decade - and loving it.

[jhood001]

I'd buy something less than $200K. Lots of foreclosures the banks are trying to get off their books. If you are a veteran, it is easy to get a VA backed mortgage. Alot of houses require a 20% down now. I paid $130K for my house in 2006. Brand new house on a acre. Last month a house on the same block, same size and age was listed for $89K. If I lived in the metro area, I'd buy a house west in the mountains, with a little land. Do you bank with a bank or a credit union? Ask them about any foreclosures they have on their books. $150K house with 20% down is $30k.
I'd buy a house where you can easily meet the payment. Being foreclosed upon can wreck your credit. As for building credit rating, make sure any defaulted credit cards and other bills outstanding get paid off.

A good point here. While most people out there are taking loans that are difficult to pay for two earners, I would recommend the exact opposite and only take on a mortgage that just one of you would be fine paying for your first home. Shit happens and it happens often. You can always jump up to a better house after a few years. Take your second income and save it for a down payment on your dream home.

[BEELZEBOB]

One of the biggest factors for credit score is average length of credit. If you open a new card or two it is going to shorten the average and bring down your credit score.

Another major factor is your percentage of credit utilization. What is the percent of money you owe versus your total credit limit?

Do you have any collection accounts or negatives on your credit report?

I just learned all about this as I was cleaning up my credit score.

No collections or outstanding negatives. Just went from having absolutley no credit whatsoever 5 years ago, to now.

I think I currently owe just over 50% of my total credit limit. Just did a 50/50 cash vs finance on an engagement ring. I will have that paid off in full by June/July


I'd buy something less than $200K. Lots of foreclosures the banks are trying to get off their books. If you are a veteran, it is easy to get a VA backed mortgage. Alot of houses require a 20% down now. I paid $130K for my house in 2006. Brand new house on a acre. Last month a house on the same block, same size and age was listed for $89K. If I lived in the metro area, I'd buy a house west in the mountains, with a little land. Do you bank with a bank or a credit union? Ask them about any foreclosures they have on their books. $150K house with 20% down is $30k.
I'd buy a house where you can easily meet the payment. Being foreclosed upon can wreck your credit. As for building credit rating, make sure any defaulted credit cards and other bills outstanding get paid off.

I want that 90K house! LOL where do you live? I bank with Chase.

We found a really decent pace in Golden for $190 with a decent amount of land.

[ChunkyMonkey]

A good point here. While most people out there are taking loans that are difficult to pay for two earners, I would recommend the exact opposite and only take on a mortgage that just one of you would be fine paying for your first home. Shit happens and it happens often. You can always jump up to a better house after a few years. Take your second income and save it for a down payment on your dream home.

^ yep. And if you push it even further...if you keep buying at 20% under and assuming at right around the same price, your 5th home should be free and clear.

Furthermore, work with realtor with bank hookup!!! If you think you see the best deal in the open market, you are naive. I don't give up my pre market foreclosure list to just about anyone. In most cases, the ones are in the open market are the left over from the carnage.

[Teufelhund]

One of the biggest factors for credit score is average length of credit. If you open a new card or two it is going to shorten the average and bring down your credit score.

Another major factor is your percentage of credit utilization. What is the percent of money you owe versus your total credit limit?

Do you have any collection accounts or negatives on your credit report?

I just learned all about this as I was cleaning up my credit score.


^This is good advice. Your income vs debt is a factor when you get ready to buy a house. If you have debt, pay it off quickly by starting with the lowest balance and paying minimums on everything else. Once the lowest one is paid off, apply everything extra to the next lowest balance. Repeat until it's all gone. (Thanks, Dave Ramsey)

As stated above, any new credit accounts you open are going to hurt your score. In fact, your score takes a hit every time someone checks your credit. If you keep these accounts open for a long time, with a low balance, and in good standing, your score will eventually go back up, but it takes some time.

FWIW the wife and I have several credit cards and we pay them off every month to keep from paying interest on any of them. This does build credit, but only because we are keeping accounts in good standing for a long period of time. Get something with a rewards program so you're getting something extra out of it (cash back, airline miles).

[Lurch]

Say something on fox news last night about a federal program that helps people get into a home. You may look into it. http://kdvr.com/2013/03/19/home-buying-program-helps-more-people-get-their-own-houses/

I agree with the others that you don't need a 250K plus home right now. Find a nice foreclosure in a good neighborhood and start to fix it up. Hopefully the housing market will turn around and you will have a nice chunk of equity to play with then.

[Teufelhund]

I agree with the others that you don't need a 250K plus home right now. Find a nice foreclosure in a good neighborhood and start to fix it up. Hopefully the housing market will turn around and you will have a nice chunk of equity to play with then.

+1 You don't want to be "house poor," as in stretching the limits of your income to make your mortgage. When we bought our first house, the bank kept trying to push us into a $350k+ house because of our credit scores and income. We opted for something under $230k and it has worked out well. Our mortgage payment is very low and we're able to pay extra toward principal every month. Since your interest on your mortgage is based on the amount you owe, the faster you pay down the principal amount, the less interest you pay over the life of the loan. (I'm just learning about all this too, this being my first house. Someone please correct me if I've got this mixed up in my head. I don't want to give any misinformation).

[al_g]

+1 You don't want to be "house poor," as in stretching the limits of your income to make your mortgage. When we bought our first house, the bank kept trying to push us into a $350k+ house because of our credit scores and income. We opted for something under $230k and it has worked out well. Our mortgage payment is very low and we're able to pay extra toward principle every month. Since your interest on your mortgage is based on the amount you owe, the faster you pay down the principle amount, the less interest you pay over the life of the loan. (I'm just learning about all this too, this being my first house. Someone please correct me if I've got this mixed up in my head. I don't want to give any misinformation).You got it right, amortization is what you are referring to. There are tons of calculators out there and your loan should have available the orgiinal schedule. What really sucks when you look at the schedule is roughly the first half of the loan you pay more in interest than principal, so making extra principal payments can be really good.

[5280Nole]

Here's a good trick, go put $1,000 in a CD and take a loan out against it at the bank, pay it all back the first month. Credit report will show a bank loan paid in full. Lather, rinse, repeat.

But as a 29 year old manchild, I dont know where to start.[pick-me]

My current credit score is a 698. I would like to build it to at least 720 in the next 6 months while saving up for a wedding and down payment.

My plan to build credit would be to open up an American Express card, and just use it as I do with cash and debit cards, and just pay in full every month. (Is that a sound plan?)

Once I have built up another 20 - 30 points, I was going to try and get pre approved for a $250-$300K fixed loan. Where would be the best place to start?

I am hoping I can get a good 15 or 20 year fixed mortgage.

Can I ask for the kindness of one of you "adults" to kick me in the right direction?

[Scogin]

No collections or outstanding negatives. Just went from having absolutley no credit whatsoever 5 years ago, to now.

I think I currently owe just over 50% of my total credit limit. Just did a 50/50 cash vs finance on an engagement ring. I will have that paid off in full by June/July



My understanding is that optimal range is around 7%. They want to see that you are using your credit but are not maxed out. If you are at 50% utilization paying that down to 7% should get you 10 to 20 points easy.

[Inconel710]

Easiest way to get qualified for a mortgage? Walk in with 20% down payment and talk to a lender with a brain. The big national banks like Chase do not have a good reputation in this area. We had great success dealing with Ent FCU when we moved out here. That downpayment goes a looooonnnnngggg way towards assuring the bank they're making a good loan.

+1 to NOT buying a $300K house (unless you're making $100K/yr, but you probably wouldn't be asking this question if that were the case). I like Dave Ramsey's recommendation to keep the payments under 25% of your take-home income each month. If you stay within that limit, it's unlikely the house payment is going to stress you. You're also in a better position if Murphy comes knocking on your door.

[BushMasterBoy]

Other bit of advice on a foreclosure, make damn sure there never was meth in the house! One of the reasons I bought a fairly small BRAND NEW house. Other reasons for a small house, cheaper insurance, taxes too. Newer houses qualify for lower insurance premiums. Plus I heat the whole house with a wood stove that is situated almost in the middle of the house. One January the gas bill was $220, so a $1K investment later in a chimney and a good used wood stove from craigslist I have a warm house by burning mainly old wood pallets.

[BEELZEBOB]

Thank you guys.

This is very helpful.

No better place to start building a future, than digging through other people's similar past.

[Lurch]

Thank you guys.

This is very helpful.

No better place to start building a future, than digging through other people's similar past.

and Murphy will bite you. I have been unemployed for 6 months now and just found out that I have some medical conditions that may prevent me from working for a while. Luckily the wife and I built a smaller house in Elizabeth and put everything towards it we could and it's paid off before I turned 47.

[DeusExMachina]

I don't know what the threshold is, but you need to have some amount of credit in your "pool". A few credit cards that total up to some largeish amount of money.

When your credit score is updated once a month, your balance on those cards is divided by your total pool. So if you have $100 on one card out of $10,000 available across all your cards, you're at 1% utilization.

For every percentage point of unused credit, that's 1 point on your credit score.

If you have NO credit cards currently, you'll want a few (spread out your applications) and use them sparingly. It's good practice to pay it off every month, because you will still have a balance shown (you pay last month's balance, then use the card on your bill due date, that new charge will be on your reported balance when they report on your due date).

[sniper7]

I have a realtor for you when you are ready. I would buy sooner than later. Rates are going up and houses are literally only lasting a week on the market. My buddy just signed the contract on one and they had 3 offers on it in the first day.

[BigNick73]

Ask around and find a good mortgage broker. There's a lot of different types of loans out there and they will be able to explain it and help you figure out which one is best suited to your situation. I can tell you that your score will matter a lot less than your debt to income ratio. When I did mine it was all they cared about, think my score was around 720 at the time and had no problems getting financed back in 2010. Also be sure and figure out insurance and property taxes for the property, before making an offer, as that can make up a large portion of the monthly payment.

Ohh and since you'll be married have plenty of money left for paint, fencing, landscaping, light fixtures etc.. as that's huge expense the first year.

[Teufelhund]

One other thing I learned when shopping for our first house. There are different types of realtors: brokers and agents. You want to find an agent instead of a broker. An agent will act more like a guide in helping you find the right home, while the broker just deals in volume and wants to get you into the highest priced house you can afford, as quickly as possible, collect their commission and move on to the next deal. We used a broker, not knowing the difference, got stressed out and sick of begging him to take us to look at houses, and just settled on something that we were not necessarily excited about. I think it could have been a much better experience with a real estate agent.