Looking to Buy House in six months, need advice

[BayRaider510]

I'm looking to buy a house in about six months or so. Was wondering if you guys could give me your opinion whether I'd qualify and/or what I need to do in the next six months.

Personal: I am 24 years old and am looking to buy on my own. 

Credit: My score is about 730 but I have a very short file. Only 2 accounts, both credit cards with low limits. $500 and $1100. One card is 16 months old and the other is only 5 months old. Nothing negative has ever been on my credit report. I have no debt at all. 

Income: I make around $40,000 per year gross income. Been at my job for 2.5 years.

County, State: Stanislaus, CA

House Price Range: I'm looking for something in the 165,000 to 180,000 price range. 

I realize FHA may be my only option due to lack of credit history... if that ends up being the case, is it possible to refinance to a conventional loan later on? FHA MI is really expensive.

My income qualifies me for a program in my city where they give you a loan for $50,000 or 40% of the sales price, (whichever is less, in my case it'd be the $50,000) and you do not have to make any payments for 30 years if you choose not to. I would make payments on this loan at my own pace which would really help me out in the first few years as I plan on moving up in my job.

With that $50,000, I'd have well over 20% for a conventional loan but with my thin credit history and only two tradelines, I'm assuming I would not qualify? Should I open a 3rd credit card and maybe just try to wait a year so I have three tradelines over a year? Any suggestions are welcomed. Thank you.

[MorToProducer]

Good afternoon. Everything sounds good so far but we like to see 3 tradelines in good standing, so open up another credit card right away, keep balances very low versus the limits on all. If you do this now, in 6 months you can probably qualify for a conventional loan (verusus the expensive FHA one). Yes you could do FHA and then refi to conventional but you should be fine to get conv the first go around if you open another credit card AND as long as you can put down the minimum 5% Conv loans require (must be your own funds, not gift funds, and they source deposits on bank stmts to verify this).  I'm not familar with the specifics of the local city financing option, it sounds like a "silent 2nd mortgage" with no payments/delayed payments but check the fine print.  Usualy these must be paid in full if you ever refi or sell the home, so keep that in mind.  Very few people keep the same home for 30 years, even 5+.  We currently have options with 5% down (as long as your own funds, not gift) with and without PMI. Without PMI basically your rate is slightly higher but total payment/month is a lot less.  With PMI  today you'd be around 4.125% with no points. 4.50% with no points and No PMI.  Let's assume 180k PP and 5% down thus loan of $171k.  At 4.5 that would be PI payment of $866.43/month + taxes/insurance. We lend a lot in CA, and i think the tax rate is 1.1 or 1.2% of purchase price for new buyer so that's about 180/mo and I'd guess insurance at about 50-70/mo depending on your deductible. So out the door on no pmi option would be ballpark $1100/month.  With no debt, that puts your DTI ratio around 33%, well in the accepted range. Let me know if i can help further if/when you're ready.