Fannie Farmer
How can you qualify for a mortgage with no credit history and a meager income?
I want to encourage my son to become a homeowner as early as possible, but he has no credit history (good or bad) and limited income. I looked at the websites of HUD, FHA, Farmer’s, Freddie Mac & Fannie Mae, but couldn’t make heads nor tails of what may be available. Should he go to one of those homebuyer’s counselors mentioned on these wesites to find out what steps he needs to take?
It is possible, but not a good idea right now. He should first build a little credit history – just a few things that is all – kids and adults these days can get over loaded with credit and then make it a problem – advise him to get a gas card and if possible a small loan from a bank, either a personal loan or a car loan – whatever sounds fessible – when I worked at the bank what I would typically tell a young person looking to start credit and they had a little money set aside was to open a CD – say a 500$ or 1k$ CD – for a year term – or whatever terms your local bank offers – then take a loan out on using that CD as the collateral – a good loan officer will place the rate of the loan about 2 pts. above what the CD is earning in interest – so basically your only paying 2% interest on the loan – don’t do anything with that money unless you can for sure pay it back – this will establish a credit line in your sons name and not cost him much.
After your son has a credit history (a good credit history for say a year or so) and our market has leveled out a bit and his is making a little more money then start house hunting.
Besides that – unless you live in an unaffected market – today is not a good day to buy – renting is actually more cost effective. Plus some creditors will look at a renters history and add that in to figuring out credit worthiness. Just advise him to pay rent and all bills on time, if not before the time they are due. Good habits to establish anyways!
Fannie Farmer’s Banana Bread
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