I’m sixteen and no I am not expecting to buy a house anytime soon. I just want to know what I can do so when I am older I can be approved for a good loan to get a nice house. Also, what else do I need to know about this?
How Can I Ready Myself To Be Approved For A Good Home Loan?
February 13th, 2010 by Home Loans Leave a reply »
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Here is what I advise:
1. Protect your credit rating. Pay your bills on time and in full. Building good credit is a huge help. There are two situations you never ever want to be in. They are:
Having bad credit
OR
Having no credit.
If you have never ever had credit in your life, then someone has to be the first person to extend you credit and a bank may not wish to be the first on a parcel of real estate.
So, do not have credit cards when you are in college. I got through college without them. Get one credit card when you graduate college and use it only to buy things you’d ordinary pay cash for.
2. You will need a job that allows you to cover the mortgage, property taxes, insurance, and maintenance on your home. Flipping burgers won’t get you there. So, stay in school and learn a marketable trade after your graduate. This doesn’t mean you go to college and become a doctor. But you have to have a skill that allows you to earn a good living.
Right here and now, be very mindful of your credit rating. Don’t do anything that will mess it up.
The most important thing your lenders will look at is your credit score. Your credit score is based on: (1) if you pay your bills on time, (2) if you have some debt (credit cards, car loans, etc.) but not too much, (3) how long your credit card accounts have been open, the longer the better, (4) several other factors of lesser importance.
You will also need a certain amount of money as a down payment. Generally, 20% of the price of the house is good to have although you can get by with less if you have great credit.
You also should have a steady job with enough income to pay the mortgage, property taxes and homeowners insurance. If you changed jobs in the past two years, that can work against you.
First, congratulations for thinking about this now, when you can do something positive about it. Not many your age would think that they ought to approach it from this angle.
I would want to add that in your early years you will want to maintain a lot of flexibility in your housing arrangements. You won’t want to be tied to a home if your career advancement causes you to move around. So don’t be in a huge rush to put down roots; paying rent is not throwing away money as some would say.
Of course, work on building your credit. Start out small and don’t bite off more than you can chew. Always make your payments on time.
Resist the urge to buy a lot of stuff or entertain a lot. Live simply, and accumulate as much cash as you can (invest wisely and save). My rule of thumb is to have enough in savings to cover at least a 20% down payment (to avoid PMI on the loan), the estimated closing costs, and end up with at least 6 month’s salary in a fairly liquid savings account of some kind. Home ownership infers a bunch of little unexpected expenses will always pop up, and this emergency fund will let you sleep soundly at night.
Although he writes a lot for people who are in big debt or trying to get out of credit problems, you ought to pick up some of Dave Ramsey’s books as they will give you a ton of good advice. If you put those things into practice now before you have problems, you will be the envy of all around you (me included).
Get a good stable job, don’t mess around with your credit, pay ALL bills on time, and finish college.
I Agreee!!!