When it comes time to apply for a mortgage, lenders are almost always going to look at a person’s credit history. Many people establish their credit through the use of a credit card or automobile loans. People who do not have a credit history usually find it much harder to take out home purchase loans.
Many lenders are going to be reluctant to work with someone without a credit history since they will worry the person will struggle to make timely payments. Even though it may be harder for people without any credit to qualify for a mortgage, there are some steps to take to increase your changes.
What Can I Do to Qualify for a Mortgage?
Those without a credit history might be able to use their payment history to increase their credibility as borrowers. Demonstrating a history of paying rent, student loans, cell phone bills, and utility payments on time can be shown to a lender to potentially increase the chances of securing a mortgage. Having a large monthly income, little debt, and a good amount of savings will also serve as a benefit.
However, a track record of late payments or negative civil judgments are going to pose significant problems.
Smaller lenders are sometimes more open to working with people who have no credit. A small bank or an independent broker is going to be able to give more personalized attention to people who are seeking a mortgage.
Consider an FHA Loan
Another option on the table would be to look into a Federal Housing Administration (FHA) mortgage. Loans from the FHA let lenders qualify nontraditional borrowers. They are specifically designed to help people with lower incomes get a mortgage, along with first-time homebuyers. A lot of FHA loans have a smaller down payment than traditional loans.
People who are looking to successfully secure a FHA loan must have
At least one year’s worth of timely rental payments with no delinquency
A maximum of one 30-day delinquency to outside creditors
No collection accounts, except if it is related to medical expenses
In addition, people must not let their debts exceed 50% of their total income, and are required to have at least a month’s worth of cash on hand after mortgage costs and down payments are accounted for. However, the paperwork required to secure a FHA loan can be long and tedious, and the federal government places specific stipulations on what the home can be used for. People who receive a FHA loan are also required to pay ongoing mortgage insurance premiums.
Start Planning Today
Some people looking for a mortgage without any credit decide to acquire a credit card and start building a traditional credit history. This process can be a long and tedious affair, but it makes qualifying for a mortgage a much easier task.
814 Morena Blvd #310
San Diego, CA 92110
Phone: (619) 692-3630
NMLS ID # 908271
Community Mortgage, Inc. is an Equal Housing Lender. As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, marital status, age, because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. Disclaimer: Programs subject to change without notice. All borrowers must qualify per program guidelines