Thank you Alline Birkel for your original blog.
The recent onset of unpredictable events has set lots of folks back with their goals to buy a home. Unforeseen job losses, expenses, and a general focus shift from planning to surviving has contributed to this.
I hope you haven’t found yourself in that boat. If you have, and had plans to buy a home within the next 12-18 months, keep reading. I will cover the basic steps you can take to get on track to buy a home.
- Credit score
Typically, lenders looks for a minimum credit score of 620. Having said that, below are what lenders are looking for as of 1/12/2020 for different loans.
Caliber Home Loans:
620 for the conventional loan.
580 for the FHA loan
Works with brokers who go down to 580
The rest of them are looking for 620
Fairway Independent Mortgage:
600 for FHA and VA loans
620 for conventional loans
Down payment assistance programs: 620
- Credit history
Since your overall credit score is affected by how long your credit lines have been open, it is important to open lines of credit rather sooner than later.
Your FICO score is comprised of 5 categories which affect it. Here is the breakdown of how much each category contributes to your score.
- Credit Balance
As a general rule of thumb, it is helpful to use no more than 30% of your available credit balance. No more than 10% if you are looking to veer on the super safe side.For example, if you credit limit is $1,000, it is best to stay under $300, and better even to stay under $100 used credit.
Though there are state programs that assist with down payment and closing costs, in the form of grants and no to low interest loas, it is good to have some money saved up.
Besides the money needed for inspections, and earnest money, for example, it is easier to win a bid on a home in this competitive market if you have some money saved up.
See this link to read my article about out of pocket expenses when buying a home.
Not only can this money be used as additional down payment funds, but you can actually get pretty creative when it comes to how to use it. Message me if you’d ike to know more about that!
I would like to be able to tell you exactly how much to save, and what exactly your credit score should be, realistically, to be a qualified first time home buyer. However, because each person’s scenario is so different, it is hard to do this.
If you are in the neighborhood of the credit scores mentioned here, have a solid employment history for at least 6 months, it is worth talking to a lender.
Talking to a lender is free. If someone charges you to get pre-approved, I highly recommend seeking the advice of someone in the industry to double check their credibility…you can always text or call me with these sort of questions or concern.