Tips on how to prepare for a home loan??????
I would like to purchase my first home within the next 4 years. I would like to know what sort of things I need to be aware of now, in order to buy a home and secure a loan with little stress. I just graduated from college and am looking for employment (right now I serve in a restaurant while I search for the right job). I have started saving and I also started an IRA. My credit is ok, had some problems about 8 years ago but none now. What are my best options for saving during this period, savings account, CD’s, bonds, market, etc?????? Is there anything else I should be doing as far as credit? I have 2 cards with very low limits (both under $500) that I pay off every month.
Any suggestions would help.
March 1st, 2010 at 5:37 pm
Save 20% of the value of the home for your down payment.
Keep doing what you are doing with your credit cards. Do not close the cards. You will need to show the length of credit.
Always pay on time and above the minimum balance. Keep your credit ratio down to under 30%.
Best options for saving money:
Savings account – the interest rate is too low. But it is usually readily available to you.
CD’s and Bonds are better interest rates, but you have to wait on maturity to not suffer a penalty.
Right now, I would stay away from the market, unless you really know what you are doing.
The market is for long term planning, and the 4 years you are looking at is too short of a period – you might lose everything.
March 1st, 2010 at 6:12 pm
Home loans are now available to many people for whom they would have been out of the question just a few years ago. You’d be in much better shape to bargain for better interest rates if you had a more impressive credit history, but if the house you want is the deal youinterest rates, get bigger returns on the money loaned, and the borrowers get a homes in which to build equity, and chances to restore their credit records so that the first bad credit home loans they take will also be the last!
March 1st, 2010 at 7:02 pm
Congratulations for actually thinking about what is the best way to go about it. Check you credit report free every year at
annualcreditreport.com…..this is the FTC’s free report…..you dont sign up for some service like freecreditreport.com. Make sure nothing shows up that doesnt belong to you.
You’re on the right track. But you don’t have enough credit.
When you understand how credit scores are assigned, you gain the ability to manipulate your score.
Your scores are assigned based on the following
#1 35% of your score is based on your payment history. Never miss a payment on an account that reports to credit bureaus.
#2 30% of your score is based on amounts owed in relation to amount of credit available to you. If you only have 2 cards under 500 you dont have that much credit available to you.
Call the companies and ask that they increase your limits but dont use the increase. You want to show that you have been trusted with plenty of credit but have the discipline not to use it all. Keep all cards below 50% balances. Dont rack one all the way up- better to spread out.
#3 15% of your score is length of time on your accounts. Don’t close accounts. You want long time relationships with creditors.
#4 10% is types of cards. Avoid store charge cards and stick with low interest rate regular credit cards.
#5 10% is new credit – Dont go out looking for a new car, apply for credit cards within a few months of starting your loan qualifying for a home.
Keep in mind that your scores will have nothing to do with how much you make………a credit report doesnt reflect your income at all.
If I were you, I would increase my limits on those cards and open a visa or mastercard now with a higher limit so that it will be nearly 4 yrs old when you get ready. Just don’t use it.
On our website is a Understanding FICO scoring pdf document. You will need Adobe to read it but it is good info to have.
Good Luck