credit question

[Sweetrice80]

Hey guys, I just got back from my local B&M where one of our fellow Cpers works. While smoking our cigar we were talking about my future and such. To update some of you, I will be getting married in July, my future wife (Anna) will be moving down to DC to get her PHd. In the mean time we need to find a place to live. As many of you may know, renting has its benefits, however, I always feel I am pissing away my money with nothing in return.
With that being said Anna and I have been discussing maybe buying a house. My only worry is that after her PHd, we may want to move out of DC and go a little more south. So my two concerns are 1. Selling the house after we buy one. 2. my credit score. Though my credit score is actually pretty good for a 23 year old, I was wondering if any of you guys have any tips on increasing it, to give me the best chance getting approved of a house.

I would also, if you could kindly, let me know if buying a house now is a good idea if we thinking about moving within the next 5 years. I know the market will surely come back up, but I always fear that I will be stuck with a house. Let me know what you guys suggest. I know there are many smart businessmen/woman on the boards here, as well as some older guys/gals that have been though this before. I know life is never a sure thing but I want to make a step in the right direction to make things work for the best of Us (Anna and I)

Thanks again for your input.

David

 

[grateful1]

With out more detail, you may want to think of a condo.

A lot of options if you move...or not move.

Do the research and find a good location and condo(or townhouse style).

You could rent for a while, if you move...or not move...until you sell it.

 

[Gonz]

I don't know of any short term ways to increase credit. It seems like sort of a catch 22, you need to open and use a few lines of credit over a period of time to establish a strong record of payment history, but at the same time you can get dinged for having credit lines (whether they are credit cards, bank lines of credit, car loans or whatever) that are too new. Or too many credit lines.

 

[khari]

If your credit score is pretty good and you don't carry too much debt, the best thing you can do is have a chunk of money saved up. For a first time buyer, the goal should be to put down 20%. The closer you get, the better off you'll be.

 

[bfisher88]

Sweets give Tony, mtshdtv a PM and ask about financing such as an FHA loan for yourself. Not to terrible to qualify for. I'm 20 and I was about to buy a condo up here, they just didn't accept my offer. So it can be done. As far as living in it then moving, if your going to be in the home more than 2 years then I would buy. If not then rent. If your not in the home for more than 2 years then when you sell the taxes on the home will be ridiculous as compared to if you stay after 2 and get the tax break, up to 500k i believe.

 

[Marco-Polo]

For what it's worth:

PhD's are "supposed" to take 4 years in the USA. Usually it's more like 5 or 6 (or 7 or 8, depending on the area of study. Bench science goes faster; theory or social science goes slower; liberal arts, like history or english, slowest of all. So you're going to be in place for a while.

That said, there is a tipping point where you're paying more for rent than owning, but as far as I know it's close to 7 years. So you're very close to the tipping point, wherever you are, but not necessarily on the "good" side of it. More importantly, with economic trouble, you're likely to see a fair bit of volatility on the market (prices up one day, down the next, and so forth), and you don't want to have to sell during one of the dips.

What I would say is to check out relative housing and rental rates. If you find a place that you could rent for roughly what your mortgage and property tax costs, buy. That's a safe bet. The further apart these two payments are - rent of an equivalent house vs. mortgage - the more risk you're taking on (since you're depending on increasing real estate costs to make it worth your while). If you couldn't even cover the cost of interest with rent, then don't even consider it. Buy lottery tickets instead.

 

[Eryxis]

Easiest way to get a boost I can think of is to get an increase in existing credit lines (but don't spend any more obviously). Simply call up your credit cards and assuming you pay in full each month or at least more than the minimum you should get a bump quite easily. If you don't have an American Express Blue CASH (be sure it's the cash and not rewards) I really recommend it, and you can request credit line increases every month online and it goes through with no problem. I got up to around a 20k credit limit while I was in school making 10k a year.

Ery

 

[sigar_zealot]

As others have said research the area thoroughly. In some areas condos and townhomes appreciate at a slower rate compared to single family homes. In other areas they do really well.

Something to consider regarding condos and townhomes especially in this credit market is the HOA fee counts against what a buyer can qualify for on a monthly basis. If the fee is $200.00 a month, that eats up about $40,000 worth of mortgage they could potentially qualify for. If qualifying ratios are tight a single family home may be a better option.

In this market I wouldn't buy anything I didn't plan to own for 5-7 years.

I highly recommend you contact a realtor in the area you wish to relocate and have them set you up with a mortgage broker they do business with on a regular basis. There is no secret to raising you credit score quickly. You can however ruin it overnight.

Edited to add: Everytime you have your credit checked your rating takes a small hit. Asking for more credit from creditors will not increase your credit score.

 

[Not A Nice Person]

One thing to keep in mind is that both housing and rent are hugely expensive in the DC area. This being a nearly bottomed out market, if you can afford the mortgage, it's bound to make a bit of a turnaround by the time you sell, and that's a high demand area generally.

A friend of mine works for the Red Cross and just got kicked upstairs to their national office in DC. He says just a house, nothing fancy, is about half a mil. There's bound to be better deals, but then you have neighborhood to consider.

~Boar

 

[Eryxis]

Edited to add: Asking for more credit from creditors will not increase your credit score.

Yes it will. A verified factor in your FICO score is the ratio of how much you have borrowed compared to how much you CAN borrow. If I have 5,000 dollars in CC debt with a 5,000 limit then i have utilized 100% of my credit available which will negatively affect my score. However, if I have 5,000 CC debt with 25,000 available credit then I have only utilized 20% of my available credit and get a bump to my score. You are correct about the small hit your FICO score takes when somebody runs your credit. As an added bonus to increasing credit lines on your cards most companies increase your limit without running your scores again... so you get the positive bump from a better ratio as well as no negative for having your credit checked.

Ery

 

[SiriusBlack]

I am 33 and purchased my first house about 3 years ago. I honestly didn't have great credit at the time and wasn't even looking to buy but a great opportunity came my way. I needed (or thought I needed) a couple extra points to get me over the hump with an affordable deal that I wouldn't regret later. At any rate I found out about "inherited credit". Basically you get some one with some positive lines of credit...ones that have been open for a number of years and not maxed out. You get them to add you to the lines of credit as an "authorized user". In about 30 days or so those lines of credit will show up in your credit history as if they were yours. So for me I went to my mom. I think we added three of her credit accounts that she had for 5+ years. Sure enough a month later they showed up on my report as if they were my positive accounts. Now you are not going to get a huge bump this way. However if you are just looking for a little cushion this is a quick way to do it if you have a parent or someone that can help you out. PM me if you have other questions.