Most mortgage lenders today require that you have an established credit history in order to obtain a mortgage. One of the first things a lender will do when you apply for a home loan, is check your credit in order to see if you have established credit, and also what your current credit scores are to determine your creditworthiness.
However, some of you may have no credit because you have not taken out any loans, credit cards, or you may have chosen to live a “cash only” lifestyle. Please understand that this does not automatically prohibit you from getting a mortgage.
There are certain government sponsored mortgage programs such as the Federal Housing Administration (FHA), Veterans Administration (VA), and United States Department of Agriculture (USDA) Rural Development loans that allow borrowers with no credit history to obtain a home loan as long as you meet their other requirements and underwriting guidelines.
FHA, VA and USDA mortgage programs have less strict borrowing qualifications in regards to your credit. For example, they will allow you to show alternative lines of credit such as a documented rental history, utility bills, car insurance, life insurance, cell phone bills, and other monthly bills in order to establish your creditworthiness. The only requirement they have in regards to these alternative lines of credit is that they must have a 12 month or more payment history, with no late or missed payments.
FHA loans can be used to purchase or refinance primary homes that are one to four unit owner-occupied residential properties, condominiums, and manufactured homes. VA loans are made by lenders to qualified veterans to finance the purchase of a primary home. USDA loans require that the home to be purchased or served must be located in an eligible rural area as defined by USDA.
These loan programs are generally flexible and lenders will look to see that borrowers must have stable income and employment history to qualify.
There are other things you can do to ensure that you can get a home loan if you do not want to obtain, or do not qulaify for a government sponsored mortgage program.
You can also apply for a credit card, and/or a car loan and pay regularly and on time to slowly build a good credit history. A vehicle loan and a couple credit cards with low balances that you pay every month will help you build credit over the next 12-24 months.
Please keep in mind that you do not want to have too many open accounts because this may hurt your scores. It also takes time, patience, and making your payments on time to establish good credit.
If you need assistance obtaining a home loan or in establishing your credit, I would be happy to help you in any way I can. Please call me direct at 619-379-8999 or toll free at 1-800-779-4547.
I’m LoanSafe.org’s mortgage expert and a senior loan officer with Prime Lending. If you need a live rate quote, or need help getting a new mortgage, please call me direct anytime at 619-379-8999.