Using Credit to Become a Homeowner
Updated: Oct 3, 2022
Leaders Are Creating Policies and Programs to Make Home Ownership a Reality for Young People
Five essential steps to buying a new home
Thinking about purchasing a home? Use these tips to get your finances in order before you start house hunting.
1. Know and understand your credit score.
Your credit score is one of the most important factors to buying a home using credit. Most lenders like to see a minimum of a 640 FICO® Score to qualify.
2. Secure a down payment.
Although there are 0%-down payment loans available, a good rule of thumb is to save 3% to 20% of the home price for your purchase.
3. Gather important documents.
Obtaining a loan means completing lots of paperwork. Today’s loan application process can be done online, where available, by pulling in data from your financial institutions. Having your electronic paystubs, bank statements and W-2 tax forms readily available can make the loan application process much faster and easier. Other documents will be needed along the way.
4. Get a loan pre-approval.
Work with a home loan advisor to get pre approved. This lets you know what kind of home you can afford. It also lets sellers know that you are a serious buyer.
5. Find your dream home.
Start shopping for your dream home. The location of your home is important. Consider your commute time, access to restaurants, parks, and schools. Your cost of living could increase or decrease based on where you choose to live.
Young people realize that the fastest way to accumulate wealth is buying instead of renting a home. But the increasing costs of home ownership combined with stagnant wage growth has forced many young people to forgo buying a home and instead rent. For many years, only the young people whose parents have the financial means to help them have been able to buy a home in their early 20's. However, that is changing thanks to many new programs that are dedicated to making home ownership a reality The National Urban League and Experian Launched a Partnership to Support Financial Inclusion their members ages 21-40 – and those enrolled in one of the 12 Urban League Entrepreneurship Centers with free access to their Experian consumer credit report and FICO® Score, along with the ability to potentially increase their credit scores instantly with Experian Boost™. Experian will also be offering small business tools, services, and educational content.
Based on a more inclusive credit-scoring model, Experian Boost can boost credit scores to reflect a more accurate payment history by factoring in utility bills, cellphone bills and video streaming services.
Get involved in your local Urban League chapter today and take advantage of building your network and your credit towards homeownership.