Buying A Home
hjhmomma
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Any and all advice welcome!
Afternoon Ladies!
DH and I are looking to buy a home in about 14 months. After years of, well I will be honest, being flat out idiots when it comes to money, we are finally on the track to being debt free and we are much MUCH smarter about finances (thank you Dave Ramsey!). My question is, what do lenders look for? What credit score is acceptable for a VA loan and how can we get our credit score up in addition to paying off debt and making timely monthly payments? We are currently in an apartment and with the little on now being 2, it just isn't cutting it, we NEED more space. I want to take the next 14 months and do anything and EVERYTHING possible to improve our chances of getting approved for a home. Thank you in advance ladies.
Re: Any and all advice welcome!
Pull your credit reports and take care of any negatives
SAVE, SAVE, SAVE
Save for downpayment, closing costs, moving costs, start up deposits, repairs/renovations, decorating/furniture/appliances, yard items, tools and a host of miscellaneous you need with a house.
AND STILL HAVE AN EMERGENCY FUND IN PLACE after closing!!!
Do not purchase any large items on credit. Pay your credit cards in full each month. Do not use more than 15% of your allowable limit.
The best things to do for your credit are-
Make all payments on time.
Try to keep your CC balance as small as possible. If you make large payments on the card you need to pay it off as soon as possible.
Try not to have your credit run unless necessary. Too many inquiries can damage credit.
Along with the previous one, no new credit cards/store credit card or loans.
Try to pay down any outstanding loans. Part of qualifying is determination of your debt:income ratio. The less you owe, the better. Of course, you need to keep your down payment in mind so try to save for that and pay off what you can.
I don't know what the rates are for VA but I do know that FHA will loan without additional downpayment to people with credit scores as low as 620. The will loan to people with lower scores than this but you will have to come up with a higher down payments. I am not sure how the VA works since they don't necessarily require a down payment. It would be best to ask a loan officer. They can answer your questions and help put you on the right path.
Good luck.
Also, have consistent employment and income. No gaps. A lender will look into several years of employment history.
Pull your and DH's credit reports from each of the three bureaus (Equifax, Trans Union, and Experian). They are free one time per year. Clear up any errors or negative information.
Read Home Buying for Dummies. Realize that renting isn't a bad thing...you can always find an apartment with more square footage or rent a house. Don't feel bad if this ends up being a reality.
Plan to budget 25-28% of your after tax/take home pay on your monthly housing expense, which should include your payment, plus any taxes and insurance. This same percentage applies to your rental payment, if you continue to rent.
And, know that houses, even great ones, are money pits. You will need far more than the $1k Dave Ramsey recommends in your emergency fund if you purchase a home. This emergency fund needs to be separate from your down payment too.
Just so you're clear, you never have a down payment with a VA loan. The "funding fee," an admin paperwork fee, is 2.5%. It applies no matter what your credit score is. Before the market collapsed, you could roll this amount into the mortgage (finance it over 30 years), so you wouldn't have to bring any money to closing, but I don't know if that's possible anymore.
I don't know anything about this website, but its information seems legit. The important thing to remember is the better your credit score, the better your interest rate.
I would go in person to your local bank and tell them you're trying to improve your credit score. Ask them if they'll give you a $500 loan. Immediately put the money to the side and pay the loan back on time every month. Don't touch the money otherwise!! It's a common thing to do around here for high schoolers so they have credit before they get to college - I don't see why it wouldn't work for adults.
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Thinking of doing cosmetic updates to a dated home? These were our costs.
Secured Credit cards are typically offered through larger banks...Wells Fargo, US BANK, Etc.
They are secured by your own money. If you get approved for a card the bank gets the cash from you, "the security," and holds it safely for you. When you use the card, the money you used comes out of that cash pot, which is your money anyway.
With on time payments and being resopnsible with it you can raise your credit score...however, I am not sure how much.
Once you decide to close the card, you get your cash back from the bank minus any fees or balances you owe.
In addition, store cards can sometmes be easier to get approved for than bank credit cards. Does your grocery store have one? If so, that could be a way to go to. Use it there to buy the food you'd need anyway, pay it OFF IN FULL EVERY MONTH and don't be late on payments. I would not get a card from a clothing store since you won't use it enough to warrant it helping you build credit. Another option could be a gas station card.