First time Home buyer advice
Credit history is very important to banks and lenders in determining whether you get a loan for your new home. That is why your checking your credit report is so important.
To a bank it shows how many accounts you have open, how much you owe, how long they have been open, what available credit is available. But the most important item is your actual payment history. How many times in the last two years have you been late on your accounts? Do you always pay on time? Do you let accounts go to collection? Have you had Bankruptcy, foreclosure, or judgments? These are the items that are important in determining whether you are credit worthy or whether you get a car loan or a mortgage.
The banks and lenders usually focus on the last two years history. The better the history the better your credit score. They like to see two or three open lines of credit with good payment history. That is why you sometimes do not want to close accounts down. Sometimes older people who pay everything cash have a tough time getting credit because they have no credit history. The key is start getting credit by a secured credit card. Or get a co-signer on a loan. You need to have credit history. And TODAY IS THE DAY YOU NEED TO START TO GET GOOD CREDIT.
The credit report will show how many times you are 30 days late, 60 days late, and 90 days late and when they happened. A credit report is like a report card of your financial responsibility. The higher the grade you get the better the rate and the easier to get a loan. A poor score will cost you thousands of dollars in higher interest rates. Remember a bank or lender sees it in black and white. They don't care that you would rather go out and splurge on your birthday instead of paying your visa bill on time. There are no excuses as far as they are concerned for late payments.
After all you are asking them to take a risk and loan you money. Why would they want to loan you money if you have a history of not paying on time or not paying at all.
Collections, judgments, bankruptcies, and foreclosures are bad marks on your credit history. They linger on your credit for up to 7 or ten years. It is better to not have them on your credit report at all, but once you get them they are there. Even if you pay them off sometimes your credit score will not go up. Before you pay them off ask your mortgage person what you need to do. You may not need to pay them off.
Many people automatically assume their credit is bad. But many people do qualify for home loans even though they think they have marginal credit. Their are FHA loans available to help first time home buyers get into a home.
FHA mortgages are generally more flexible than conventional lenders in its qualifying guidelines. In fact, the FHA allows you to re-establish credit if:
two years have passed since a bankruptcy has been discharged
all judgments have been paid
any outstanding tax liens have been satisfied or appropriate arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue
three years have passed since a foreclosure or a deed-in-lieu has been resolved
It is good to get a FHA loan because it allows border line credit history and gives you a good rate. Sometimes you can get a FHA loan with just rental history, and alternative credit history. Email meto see if you qualify for a FHA loan. It is a great year to buy a home with the $8000 first time home buyer tax credit that Mr. Obama is giving out.
If live in Michigan and you have questions about buying your first home feel free to call me or email me. I will be glad to answer any of the questions you may have. If you don't live in Michigan click on the states in the blue bar at the top and find a mortgage person or Realtor close to you. Everybody here on Active Rain will take the time to answer all your questions you may have. If you can't find anybody close to where you live still free to call or email me. I will help you out every way I can.
Have a great day
Russ Ravary Your Metro Detroit Realtor serving the Wayne, Oakland, and Livingston Counties.
