How Can I Get Credit to Buy My First Home?

Getting credit to buy your first home can prove challenging if you aren't prepared for the process. Mortgage loan approvals require completing an application with a lender, and then waiting for a lender to review your application to determine eligibility. Knowing common lender requirements before beginning the process can help ensure a quick approval.

Instructions

1

Build your credit score. Develop a habit of always paying present creditors on time to help build the best credit score possible and qualify for the lowest mortgage rate. Getting credit to buy a first home requires a good overall credit score -- 680 or higher says the Home Loan Learning Center.

2

Lower your debt ratio. Increase purchasing power by reducing your balances on credit cards and paying off loans, if possible. The standard debt ratio for a mortgage is 28 percent (house payment cannot exceed 28 percent of monthly income). Do not apply for new loans just before buying a home, and limit credit card use.

3

Deal with charge-offs. Some mortgage lenders will require payment of collection accounts and charge-offs before approving you for credit to buy a home. A charge-off occurs when a creditor gives up on you paying your credit voluntarily. Contact old creditors, and make payment arrangements.

4

Keep accurate records. Income statements such as W-2's and tax returns are imperative when getting credit to buy a home. Lenders use these documents to determine what you can afford. Keep past records on file for at least two years.

5

Lengthen your employment record. Wait until you have at least two years of employment history before applying for credit to buy a home.

6

Rate shop with multiple lenders. Apply for a mortgage with two or three lenders, and then compare the loan offers to find the best mortgage rate and payment. Ask questions about various loan programs to learn the pros and cons of each possible option.

7

Ask about FHA mortgage loans. Insured by the Federal Housing Administration, FHA mortgages have reduced credit score requirements, a higher housing ratio (house payment cannot exceed 30 percent of monthly income) and lower down payment requirement. Talk to your broker or lender about FHA mortgages to see if you meet the criteria.