Buying Your First House and Your Credit Requirements

A couple of years ago, I was interested in buying a house, and my youngest brother and myself made an appointment with a financial advisor who took the time to answer our questions and basically run down the main things we needed to do in order to be financially sound enough to qualify for a loan to buy a house. Here is what he told us to do, and hopefully in the right order in which we needed to do them.

• open a savings account

• open a checking account with overdraft protection up to $300.00/month

In order to begin the process of getting your credit fixed, you must prove that you are first able to open and maintain these two accounts in good standing for at least two years. The overdraft must be in the black each month, and the checking account must not have bounced checks, for this is the reason for having the overdraft to begin with. So, these accounts should be used properly. Money should not be put in and taken out of the savings account, but it must show that you are saving a certain amount of money each month, and keeping it there. Even if it is only a small amount of let's say $40. per month, it must be left there. Do not set saving goals above what you are able to actually save. Make sure that you keep your checkbook up to date and balanced each week.

• Get between 2-5 credit cards in your name, and use them moderately.
  

• Get a couple of cards, like gas cards, that you would use for a certain purpose, and use them and pay them to a zero balance at the end of each month.

The credit cards should be of the visa or master-charge type, and each one should be used between the 20 to 50% mark each month. This practise should take place on at least two but not more than 5 cards every month. The purpose of this is to show that you are using your credit, but are not to the point financially of needing to use the card each month to survive. After buying items to show use, they should show that you are making payments more than just the minimum interest payment. The payments should be substantial enough to bring the balance down with each payment.

The gas or other cards with the store name are showing that these cards are used to maintain your car or other needs, and that you do not use them over what you can pay for each month. He said that gas cards for the car are the most perfect thing for this. These accounts show that you pay your monthly bills, and do not shun paying for your monthly needs, no matter what they are.

It is important that these credit cards be used lightly to moderately, for this shows them that you do not go over what you know you can pay. It shows the ability to use control when it comes to buying and paying your debts.

Accordingly, any other debts that you have had and have paid in a timely fashion, not paid off very quickly nor bills that you have slow paid on, but debts that show you have made a commitment and held to your word and have paid the said amounts, when you were to pay them.

These are the things that you need to show, and for the time of two years, to be able to get a loan for a mortgage to buy a house. These are the things they look for and need in order to show you are a responsible person so far as money matters are concerned. This proves to them that you pay your bills when and in the amounts that you agreed to pay them in. This is all it takes in order to buy your first home.