How to get started

The caller wanted to learn how to get ready to buy his first house. "I just paid cash for my business, and I have no credit." Nice, a clean slate to work with!

After the mortgage meltdown, Congress was really interested in making sure folks have the means to repay the money they borrow. For traditional financing these days, you'd need to file two years federal income tax returns before we can count the income from your new business.

As before, we're looking at the "net" income you claim. Even if your business is going like gangbusters, we're looking at what is left after expenses when we calculate your qualifying income.

Since the recent Equifax data breach, wanting to play the credit game sounds scary. However, without a credit score, you may not get mortgage financing. A good rule of thumb is to have three credit accounts open and rating for at least twelve months. Some loan programs are okay with less than that, but you'd be safe for all loan types if you do this.

Where should you open your first credit accounts? Some credit unions offer share-secured credit cards. They freeze your savings account as a pledge that you will repay what you charge. After a pre-determined period of your good repayment pattern, you could be upgraded and your savings balance unfrozen.

Gas cards and department store cards are also good entry points. They can offer low credit limits to get you started.

With these new accounts, you don't need to max them out. Buy something inexpensive, then pay the bill in full when it comes due. Repeat this every quarter, and in no time you'll have a clean credit report.

Since loan guidelines continue to evolve, it's always best to call and ask for help regarding your particular situation.

Tammy Engel is your local Mortgage Advisor. She's been working for your best interest since 1990, and you can reach her at 661/822-7325 for purchase, refinance, and reverse mortgage. NMLS 235051 CalBRE 01273839