How To Establish Credit

How To Establish Credit

When you hear about financing you usually hear about credit as well.  How well is your credit, do you have good or bad credit?  What is your credit score?  What you don’t hear much about is how to establish credit and today I wanted to show you a common and easy way to establish credit if you have none.

My favorite suggestion to most folks is a safe and easy one.  I like the idea of establishing your credit with a secured credit card.  A secured credit card is exactly what it sounds like a credit card that is secured… let me explain.  A bank or lender will approve you for a secured credit card, lets say with a credit limit of $300.  However that credit limit is secured, the way they do that is the bank ask you to give them the $300 as security.

You might be thinking, well am I just not borrowing my own money back?  The answer is yes, however the difference is the bank or lender is reporting your behavior to the credit bureaus, this is called credit.  So in essence what you are doing is showing the bank how you are responsible with money while they do not have any risk of losing since they have the $300 as security.

Now remember this isn’t a long term credit card to have, this is mainly just to establish you credit.  Once you establish it you can explore other credit cards or lines of credit you may be interested in like a car or home.  The main idea of credit is to have the lender report your behavior with money to the credit agency, which is how credit works.  

If your interested in this idea, save up the $300, find a bank that will issue one and apply.  Use the card, pay back the borrowed money on time over and over again.  Over time your credit will not only be established but your behavior to a potential creditor in the future will be established as being good & this should be your goal!

With a heart of a teacher I look to educate my clients about the process of buying, selling or renting real estate.  I strongly feel an informed and educated consumer will make better decisions and be less likely to be taken advantage of.

Have questions about this or other topics, don not hesitate to contact me.

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Luis Cuevas, Realtor®

RE/MAX Cross Country

1990 Justin Road

Highland Village, Texas 75077

(214) 783-0535

Luis@MakeNorthTexasHome.com

Check out my website for more helpful tips:

http://MakeNorthTexasHome.com

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5 Types Of Morgages

There are many ways to finance a home, let’s cover some of the more popular types of loan products.   Home financing options can get a bit confusing with all the terms and types of loans, each with their different requirements.  Let’s break down these different types of loans in a simple easy to understand format.  I will cover some of the more popular types of loans I see used to finance a primary residence.

Remember we won’t cover rent to own, owner finance, hard money loans and other types of financing.  While those types of financing options do exists it is generally is not very common.

These are just some of the basics for the different types of loans.

FHA - One of the most popular loans for low credit and down payment requirements

- Insured by the Federal Housing Administration

- Minimum down payment as low as 3.5%

- Minimum credit scores of 580

- 2 Mortgage Insurance Premiums

-Paid up front or financed in mortgage (1.75% of loan)

- Monthly Mortgage Insurance Premium (Based on several factors- .80-1.05%)

- This is probably one of the most popular due low to credit and down payment requirements.

Conventional - Offer better financing options however has stronger qualifying requirements

- Privately insured (not backed by government but private investors)

- Minimum down payment as low as 3-5%

- Higher credit score requirements than FHA

- Private Mortgage Insurance charged if less than 20% down payment

- Typically .5%-1% of the loan amount on an annual basis paid monthly

Ex: 100,000 loan - $1,000 per year - $83.33 per month

- Popular for those with higher credit & down payments

VA - Veteran requirement - low credit & even 0% down

- No mortgage insurance however it has a funding fee

- Funding Fee - ranges from 1.25%-3.3% (can be financed)

- Low credit score ok

- 0% down payment option available

USDA - 0% Down Payment Option

- Income eligibility 

- Property eligibility (www.usdapropertycheck.com)

- Credit Score low to middle 600’s

Jumbo Loans - Higher Price Point loan amount above conventional conforming loan limits

- Roughly $453,000 minimum loan

- Higher credit requirements - Middle 600’s & up - depending on down payment

- Higher interest due to higher risk loan

- Down Payment as low as 5% but typically higher

Keep in mind, we only covered the basics, we did not cover additional items such as:

• • • Debt to income ratios
    • Income requirements
    • Income Calculations
    • Self Employed vs Employed
    • Time on the job
    • Escrow options (Escrow or No Escrow)
    • Property Requirement - condition
    • Max Loan To Value %

As you can see there are different types of loans for different situations to suite you best.  From my experience these loan requirements can change on a regular basis and can be difficult to keep up with which I why I strongly recommend the loan officers that I work with.  They stay on top of these loans, are up to date and also know the ins and outs of loans to see which ones fit your need.  With so many variables to consider beyond credit and down payment I leave it up to the pros to assess your situation and present to you all your options. 

I hope this helped you breakdown the different loans and at least to know some more of the terms you hear all the time when it comes to mortgages.  If I can be of assistance or you have any further questions please do not hesitate to contact me.

 Again I hope this was of value and maybe you picked up a tip or two.  My goal is always to be a resource and educate my clients so they can make informed & educated decisions.

Have questions about this or other topics, don not hesitate to contact me.

Luis Cuevas, Realtor®

RE/MAX Cross Country

1990 Justin Road

Highland Village, Texas 75077

(214) 783-0535

Luis@MakeNorthTexasHome.com

Check out my website for more helpful tips:

http://MakeNorthTexasHome.com

Subscribe to my YouTube Channel:

http://Youtube.com/MakeNorthTexasHome

Follow me on Facebook:

http://Facebook.com/MakeNorthTexasHome