How can I improve my credit/ability to buy a house in the US

Discussion in 'Community Discussion' started by steviem, Jan 26, 2012.

  1. steviem macrumors 68020

    steviem

    Joined:
    May 26, 2006
    Location:
    New York, Baby!
    #1
    So a little background:

    I moved to the US in May, got married and started work in June and got a credit card with Capital One with a $300 limit as I had no credit rating here in the US. (My prior credit rating from the UK doesn't transfer to the US, which is pretty much a good thing).

    I pay my card down because, well, I can, and 2 months ago, Capital One upped my limit to $500, Verizon ran a credit check on me for when I signed up with FiOS and then I checked my credit limit on a free site, which said it is 722. I thought that was kind of too good to be true, and checked on Experian today, which gave me a score of 713.

    Now, I am married to a US Citizen. We're both 26. I'm in IT and she is a teacher. She has student debt and a little credit card debt. We don't have much in savings after using it for my adjustment of status petition and don't have a mortgage or rent to pay (kind of an ongoing wedding present from her grandmother). We want to get to a point where we can either buy our grandmother's house from her and redecorate/redo kitchen and bathroom, maybe build a garage if allowed, as it has a lot of emotional attachment for my wife, or buy a different house. I would also like to be able to approach being able to have a nice car each (all of my previous cars in the UK have been small cars way over 10 years old) and most importantly, live within our means whilst still able to go on vacations and have nice things.

    What can we do? Should I try opening another credit account or something? Should I even bother setting foot in a car dealership? Should we save 30% of our salary towards a house deposit and if so, what type of account?

    Sorry I'm putting this on here but I'm sure people have gone through this and can give some helpful advise, say things that we didn't even consider.
     
  2. ender land macrumors 6502a

    Joined:
    Oct 26, 2010
    #2
    Have you even tried applying for a loan?

    I wouldn't worry about that problem until you get rejected or have troubles :)
     
  3. steviem thread starter macrumors 68020

    steviem

    Joined:
    May 26, 2006
    Location:
    New York, Baby!
    #3
    No, I haven't actually. Mainly out of fear that I'll be rejected and also that I haven't really had a use for the money.
     
  4. cerote, Jan 26, 2012
    Last edited: Jan 26, 2012

    cerote macrumors 6502a

    cerote

    Joined:
    Mar 2, 2009
    #4
    I was told to take a personal loan for a smallish amount. Nothing massive but not a super small one either. Then make at at least 6-9 months of payments. Then after that time you can pay it off.

    Mainly if you take loan and then pay it off super fast then it doesn't give you much proof or credit that you can make payments. So the 6-9 payments gives it some room.

    Could also talk to a finacnial advisor to see their thoughts on it.
     
  5. velocityg4 macrumors 68040

    velocityg4

    Joined:
    Dec 19, 2004
    Location:
    Georgia
    #5
    You can try applying for an FHA loan. The credit requirement are usually easier and the interest rate is usually lower than a standard mortgage. If you want a fixer upper you can try for an FHA 203K. I should note that with the FHA process you house must pass all inspections before they will give a loan.

    I forget the exact terminology but in your letter of intent contract the seller needs to agree to release you of financial liability if the the house does not pass FHA inspection. Though that is more of a problem with foreclosed houses.

    For the 203K you need to get a really detailed estimate from a contractor. Then the lender will look at the sale price and estimate. If the total is less then the market value after repairs/upgrades are completed you can qualify for the loan. However, you have a limited time span to get repairs done if they are not completed on time you lose the house and loan. If the repairs cost more than expected you will not get further loans and are liable yourself, thus a thorough estimate. If the repairs cost less than estimated the remainder gets applied towards the principal, which doesn't reduce the mortgage payment rate just the number of payments. Once all work is completed it must pass the same inspection as a standard FHA loan.

    On the 203K you can also do the work yourself. But to get funds released for the costs of materials you must meet whatever their qualifications are for being sufficiently skilled to do the work. When hiring contractors get someone licensed so it is easier to get work funds released.

    203K FAQ


    The main advantage of the 203K is it opens up many properties that a standard loan would not. You can get the house you want for a fraction of the price or a much larger, nicer and up to date home than you can afford on a regular loan. Plus you can look at properties that you'd never get a standard loan for and have to pay cash normally.

    For the FHA loans you can not rent out the house, must reside in it as your primary dwelling and I think there is a time frame of one or two years before you can refinance or sell.
     
  6. felixgun macrumors member

    Joined:
    Jan 7, 2012
    #6
    I hear having a low debt-to-income ratio is very helpful in getting approved for a mortgage. 700+ credit score is pretty decent too so you shouldn't have too much trouble. Wait as long as you can because the more "revolving credit" you have, the better. So keep paying your CC monthly payments on time and that'll definitely help. The biggest issue isn't having a long history of credit.
     
  7. acidfast7 macrumors 65816

    acidfast7

    Joined:
    Nov 22, 2008
    Location:
    EU
    #7
    to be honest, do you really need a house?

    i would avoid caving into the pressure that drives people into home purchases in the US and UK.

    especially recently, there have been many better investment vehicles than an increase in one's home's value.

    also, depending on your locale, it may make more fiscal sense to rent than buy.

    i'm not against home ownership, I owned a house in the US from 2001 through 2007 and I made a killing when I sold it, however, after renting in Europe again, I see many advantages to renting, including zero maintenance costs, which allows me to save more the 50% of my net pay every month.

    If I was dead set on buying a house again in the US, I would try to put almost 50% down if possible, and I would keep the purchase price of the house less than 3 times the sum of both pretax incomes.

    Just my two Phennige.

    ----------

    also, last time I checked 692 was the median credit score in the US, just to give you a different prespective, therefore, over 700 isn't that great (for a good % rate). I would wait until you hit 750+ or preferably 800.
     
  8. steviem thread starter macrumors 68020

    steviem

    Joined:
    May 26, 2006
    Location:
    New York, Baby!
    #9
    Thanks man.

    I'm in no way experiencing itchy feet and wanting to buy somewhere right now or even in the next year.

    Our main thing is to have money behind us, enough that when we decide to buy or rent, we'll be in our best possible position. When I was a kid, my dad ended up having to work 3 jobs just to make sure the mortgage was being paid. He had to do it to make it so we could have a roof over our heads, put clothes on us and keep us fed. I don't really want that as it put a massive strain on my parents marriage and on me (at the time) not really understand why he couldn't take me to play football and things like that.
     
  9. dontwalkhand macrumors 601

    dontwalkhand

    Joined:
    Jul 5, 2007
    Location:
    Phoenix, AZ
    #10
    If this is your first time purchasing a house, check to see some first time home buying programs.
     
  10. ejb190 macrumors 65816

    ejb190

    #11
    Don't get all caught up in the credit score game. In fact, if you don't need the credit card, get rid of it. It may be easier to get a loan with a zero score then with a very low score (believe it or not).

    The major banks are not going to look at you because of your credit score (I wouldn't want to deal with them anyway), so try shopping at credit unions or local/regional banks where you will actually talk to someone who knows something. And pre-approval is key so you know what you can afford and what you can get. The more you can put down, the better off you are (a minimum of 20%).
     
  11. KnightWRX macrumors Pentium

    KnightWRX

    Joined:
    Jan 28, 2009
    Location:
    Quebec, Canada
    #12
    Before getting loans out and trying to improve your credit, how about just trying to get approved for a mortgage ? You can get pre-approved for a certain amount without buying a house or whatever.

    Why are you afraid of being rejected ? It won't change anything in your life.

    The saying "we'll cross that bridge when we get there" seems to apply here. You're over-thinking this. Walk into your bank, ask for a mortgage pre-approval to see what you qualify for and then you'll know what, if anything, you need to fix.
     
  12. steviem thread starter macrumors 68020

    steviem

    Joined:
    May 26, 2006
    Location:
    New York, Baby!
    #13
    Thanks, sorry, I'm a bit clueless about preapproval and the like... We'll have to visit a credit union and find out about that :)
     
  13. QuantumLo0p macrumors 6502a

    QuantumLo0p

    Joined:
    Apr 28, 2006
    Location:
    U.S.A.
    #14
    Get one or two credit cards and regularly make purchases then pay them off quickly. This will do wonders for a credit score. Paying on a small loan will help as well but credit cards are not nearly as large a commitment. IMO the single biggest, and easiest, boost will come from making c.c. purchases. However, if you are the type of person who might abuse a c.c. I would stay away from them.

    IMO There is nothing inherently wrong with c.c.'s but I have found people who are adamantly against them either know someone who found themselves in huge debt trouble because of them or they themselves racked up huge debt.

    Also, you could have a spectacular credit score but still be denied a loan if you have any dings on your record. 800 won't do you much good if had a recent foreclosure or other major incident.
     
  14. steviem thread starter macrumors 68020

    steviem

    Joined:
    May 26, 2006
    Location:
    New York, Baby!
    #15
    Also, how big is a small loan? My version of a small loan may be too small!
     

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