This blog is geared toward those making the equivalent of full time minimum wage or close. Most people at that pay grade are not in a good position to buy a house, nor would I advise them to do so. However there are exceptions. In the current economy, if you make a few thousand over minimum wage and have managed to beef up your savings to cover a down payment and still have some cushion for repairs, it may be a better option than renting.
About a year and half ago, I started helping my brother look into home buying
as an option. He decided to wait, but now he's ready to look in earnest. The upside of his waiting is that he has managed to save up significantly more for a down payment. The downside is that mortgage rates, while still low on a historical scale, are significantly higher than they were a year and a half ago.
Also the rules for FHA loans changed during that time and added additional fees. A couple articles from Bankrate and a link to the government site if you'd like additional reading:7 crucial facts about FHA loansShould homebuyers get FHA loans?FHA (Federal Housing Administration) loans
My brother lives a credit free lifestyle and over all does so very well, but the downside to avoiding credit is that you won't build a credit history, which is an obstacle when home buying. With FHA loans, you may qualify to use a nontraditional credit history which will look at things like your rent, phone, and utility bills. And those nontraditional histories are gaining more attention from lenders and the credit score companies (after all, if your credit can take a hit from missing a rent payment, shouldn't it also get positive points when you pay responsibly?) But the system has not yet figured out quite how to integrate them.
A year and a half ago, my bro had the minimum requirement of bills needed to show for nontraditional credit, but in the meantime, his roommate took over the cable bill. This was helpful for keeping his costs down and saving money, just like being part of our dad's family cellphone plan means he's paying significantly less for his phone number. Unfortunately, this thriftiness can backfire when trying to establish a payment history.
Frankly, home loans and certain educational loans are of the very few that make any sort of practical sense where the object of the loan is likely to improve your overall financial position, but these tend to be bigger loans and bigger risks for the lender. If you have some hope that home buying will be in your three to five year future, then you should consider taking care to establish a traditional or nontraditional credit history.
Nontraditional credit histories are things like your rental history, phone bill, electric bill, gas bill, water, etc. Traditional sources are things like credit cards and small loans. There are a lot of reasons to avoid credit while improving your finances; however, if you are avoiding credit now but hope to use it in the future, be mindful of your other bills and weigh the benefits of having things in your name.