My name is Keith Davis, and I am going to give homebuying tips and advice from my personal experience.
Growing up, since I was about 14, I always said I’m going to buy my first house when I graduate college. At the time, I was a freshman in high school, so I was unsure about a lot of things. I didn’t know which college I was going to attend, I didn’t know what I would study in college, and to be honest, I didn’t even know if I’d go to college. Despite those things, something told me to just keep living and doing what I could to reach this goal. Fast forward a few years, when I turned 16 or 17, I went and got my first credit card. At 21, I was preapproved for a mortgage, at 22 I purchased my first home.
Because of my age at the time, I couldn’t get a credit card from places like PNC, American Express, and etc. However, after doing some research, I realized I could get a retail credit card. I went and got my first credit card at my favorite jewelry store…Kays 😎 I’m assuming because of my age, my limit was only like $350, but hey I was excited.
Advice: If you are younger, under 18, start with a retail credit card at your favorite retail store. Nike, Adidas, Victoria Secret, and etc.
Parental Advice: My parents never did this for me, but when I got to college, I realized this was a thing: Parents, get a credit card and add your children as an authorized user. Literally, with most card issuers, there is no minimum age for authorized users, so yes you could add 5-year-old “Baby-June” if you want. I would personally wait until Baby-June is about 16, but hey there’s no age limit.
Now that I had my first credit card, what was I supposed to do with it? At the time, I thought I was building credit by not using my card. But how would credit card companies trust me with large amounts of money if they never seen my spending habits? That was the question I didn’t think of at first. I mean I was like a junior in high school, I didn’t know any better.
Advice: When it comes to using your card, try to stay under 30% of your total credit card limit. In addition, try to pay your full balance off each and every month.
When I turned 18, I got my first non-retail credit card from PNC, a $300 secured credit card. With most secured credit cards, you have to front the money. Your chances of getting approved for secured cards are a lot higher beacuse you take on the upfront risks instead of the banks. Since you are using your own money, the banks are like…ok.
I’ve been doing all this credit building, but where does my credit score need to be to get a house?
This may vary state to state, lender to lender, and/or loan type, but for the type of loan I received, I was told the median of my credit scores needed to be at least a 640. So what this mean is for your 3 credit scores, Experian, TransUnion, and Equifax, the middle score must be at least 640. For example, if your Experian score is 520, your TransUnion score is 641, and your Equifax score is 643, you would meet the credit score requirements. However, if your Experian score is 635, your TransUnion score is 639, and your Equifax score is 820, you would NOT meet the credit score requirements.
In addition to having the right score, lenders DO NOT like to see any credit disputes. I think this is a great thing to point out, because a lot of people are using credit repair companies today. With a lot of those companies, your credit score shoots up, but it’s because they simply started disputes against the items on your credit. If a dispute is denied, your credit score goes right back down, hence why mortgage lenders do not like to see them.
The second most important part of getting approved for a mortgage loan is having a steady income. I can’t speak on too much of how much you must make because I don’t know. But I will say, the higher your credit score, the lower the amount your income must be and vice versa. While making $17 an hour, I was able to get pre-approved for a mortgage loan around $140,000. Summing that up, I was 21 years old and was preapproved for a $140,000 home loan. Once I started working full-time, post-graduation, my pre-approval amount was a lot higher. When it comes to income, the only thing I was told was that I needed at least 3 paychecks to make sure my income was true. Of course, if you want to get preapproved for more, you need a higher income and a pretty decent credit score. General advice would be to have a job for at least 6 months, to show you have a steady income and not bouncing from job to job.
While in college, at one point, I worked 3 jobs. I made pretty good money to be a college student with no responsibilities except my car payment. With all the money I made, I simply purchased senseless items and/or expensive meals for no reason at all and didn’t save any. With this being said, when it was time to start looking for furniture, appliances, and all the home stuff, I was starting with $0. Having money going into the home buying process helps with different unexpected expenses, home inspections, appraisals, paying down any debt you have that mortgage lenders don’t like, and so much more. If I could do it all over, knowing what I know now, I would of saved money and got a much cheaper car.
Depending on how good your realtor is, he or she should inform you of first-time home buyer grants, but if not, I got you! When I purchased my home, I was fortunate enough to learn about this program through North Carolina Housing Finance Agency. At the time, the program details were:
I know that sounds like a great program, and it is, but I don’t think they offer a $15,000 grant forgiven after 5 years anymore. Looking at their site, seems like its only $8,000, and forgiven after 15 years. I would say keep an eye out for programs like this in your state. In addition to the states offering programs like this, you can look into different programs at your bank and/or mortgage lender.
Feel free to check out the details of the North Carolina grant here
Thank you so much for reading along and good luck to you on this beautiful journey. Feel free to add to this story in the comment section for future readers or leave feedback and comments.