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I'm living with my parents and trying to save up for a house, but I'm worried that because I don't have a long credit history I might not qualify for a loan when I'm ready to buy next year. What should I be doing besides saving money?

It's great that your parents are helping you this way and that you're thinking ahead. Mortgage lenders will look favorably on your savings pattern and there's no question that having additional funds for a down payment, closing costs and cash reserves for an emergency are important. However, your lenders will also need to see that you have a history of paying your bills on time, and they'll want to see that you won't face "payment shock" when you start paying your mortgage. Among the changes to mortgage rules beginning in January 2014, lenders will be required to review 12 to 24 months of your rental payment history. If you aren't paying rent now, your parents should charge rent and track it by getting payments by check, not cash. If your parents don't want or need the rental income, they can deposit it in a savings account and gift it back to you to help with the down payment and closing costs. Paying rent regularly provides a rental history and shows a lender that you can handle your housing payments.

FHA 15 Yr. - Refinance Rates from Our Lenders in Virginia

Lenders
Rate
APR
Monthly Payment
Capwest Home Loans
2.750%
3.761%
$1,018
CloseYourOwnLoan.com
0.029%
0.296%
$835
LoanDepot, LLC
2.750%
3.507%
$1,018
 

There are a couple of issues to be aware of, though. If your parents decide to give you the money back as a gift, you have to follow the requirements of each loan program. FHA-insured loans allow you to have all of your down payment as a gift, but conventional loans limit the amount of a gift depending on the size of your down payment.

Your parents need to review the tax implications of charging rent, since rent payments are considered income but can be offset by deducting some expenses. They can review IRS Publication 527 or consult a tax advisor.

While you're waiting to buy a home, you should also be building a credit history by charging something on a credit card and paying off the balance in full.






 
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