Dear Dave,
I really don�t have any established credit, because I�ve never taken out a loan or had a credit card. What will happen when I�m ready to get a mortgage loan and buy a home?
Jillian
Dear Jillian,
There are basically two ways to be in a position to get a home loan. One is to have credit at lots of places and a huge FICO score. This is kind of dumb when you really think about it, but it will get you a mortgage loan almost instantly.
When you have no credit, a lender has to do what�s called a manual underwriting. It�s something lots of banks did back in the day, when they actually used common sense when it came to making loans.
Fortunately, a few places will still work with you in this manner. They take a look at your work history to see if you have a stable job and a good income. They want proof you pay your bills on time, too. This can be as simple as showing them several utility bills, rent statements, and other receipts. They�re basically looking for a long history of proof that you honor your financial commitments.
Remember, buying a house with cash is always the best way to own a home. But I don�t beat people up over having a mortgage, as long as it�s on a 15-year, fixed rate note. Do your very best to save up for a down payment of at least 20 percent, too. That way, you�ll avoid the added expense of PMI (private mortgage insurance).
Great question, Jillian!
-Dave
Photo by Gunnar Ridderstr�m
