Ask Cora

Hey Cora: never late. Another way to get around the no credit factor, now this is going to sound a little weird, but pay your parents rent! You will need to make sure that you have record of the rent, meaning it comes out of your account and goes to them, with a check or receipts from your parents showing that you have paid. Now, don’t get all clever and think that you can just have your parents write a receipt for you, nope not gonna work! You must take the money out of your bank by check or bank transfer and have the check deposited into your parent’s account. Your parent will have to show the bank that they did receive the money from you. Sounds like a hassle? It is, but it will get you to your goal of home ownership.

I have a goal to purchase a home for myself this year! I can’t wait to own my own place and have a dog, a cat, and a ferret! Right now, I still live with my parents. So how can I make that happen? What should I do to prepare?

Signed Living in the Basement. Dear Basement: This is a very good question and I think I might be able to help you. Now, of course, there are many, many factors to these questions. So, let’s break them down and see what we can do to help you meet your 2023 goals.

1) Preparing for getting a mortgage. First thing you will need is 2 years of work history. This is very important. This does not mean that you must work at the same place for two years, but you must have history. Where do you get your history? Income Taxes you have paid. This is why you keep a copy of your 1040 tax return, so that this can be used for your benefit. This shows how much money you have made and when you started making money.

2) Preparing your credit. Now some people your age have already established credit but unfortunately, not good credit. Good credit is something you can use to your benefit in many areas of your life. Did you now that Car Insurance companies use credit score to determine if you are a good risk or not!? Many companies check your credit score before hiring you. Let’s take banks for example; if you have a poor credit score, do you really think they are going to want you handling their money when your score says you can’t handle your own? Here’s how scores are rated. If your score is between 300 and 629 you have bad credit; 630 to 689 is Fair Credit, 690-719 is Good Credit and 720 to 850 is Excellent Credit. To prepare yourself for credit, go to a bank or credit union that you work with and ask them for a credit card. NOT a debit card, must be a credit card. You will fill out an application and wait for them to determine if you are a good risk for them. Ten days go by, and they determine, yes, you can have a card with a small balance of say $300 and here is how you handle that: Your card has a $300 limit. You charge each month only 1/3 of your $300 ($100) on your card. You pay it off each month OR make the monthly minimum payment – but don’t have a balance higher than $100 ever. This trick will get you a good credit score.

4) Mortgage Shock. This is a phrase that is used in mortgage lending that means the borrower (you) are not accustomed to paying rent and therefore the mortgage company doesn’t want to put you into a position of being “shocked” when you make your first mortgage payment. This is why if you are not paying rent now, start! Pay rent to your parents if you want to stay there! It doesn’t have to be much. So, you live in the basement. You have a room and your own bathroom. Pay rent as if you were renting to someone else other than your parents, like a roommate, say $400 per month.