Lenders often advertise mortgage loan options and rates on the radio. Chances are, you have heard at least one of these radio spots as you drive to work or run errands. While presented by many different lenders, most of these ads share something in common - the announcer's spiel at the end of each ad that emphasizes that a specific credit score is necessary to take advantage of the advertised mortgage option.
If you have listened to these ads and wondered if it is possible to purchase a home without having a specific credit score, the answer is yes. Here are three possible options that you might use to do so.
Most home loans are now underwritten using a computer program with little or no human oversight. Specific data, including details about income, banking history, and debt ratios are fed into the computer system and the loan processor's computer algorithm then decides if the applicant is approved or denied. This can make it difficult for buyers with no credit history or those with sporadic income to be approved, even when they have no negative credit history.
If you are looking into buying a home, no credit does not exempt you from getting a loan. Applicants who have no credit history or other issues may be able to qualify for a home loan by choosing manual underwriting, instead of an automated process. In manual underwriting, the process is done by a human who can understand and process information outside the limits of a computer algorithm. In addition, a manual underwriting process can help applicants utilize non-typical data, such as timely payments for rent, utilities, and cell phone bills, instead of actual debt payments to decide their credit worthiness.
Those who would like to purchase a home but cannot qualify for a traditional mortgage due to poor or no credit may be able to gain approval by offering suitable collateral. For instance, a buyer who owns one property might be able to use it as collateral to purchase another property, instead of relying on a credit score to secure the loan.
Another way in which a home can be purchased with no credit is to use owner financing. In this type of arrangement, the owner acts as the lender and the buyer pays them an agreed upon principal and interest payment each month, per the terms they negotiated in their agreement.
To learn more about these and other options for purchasing a home with no credit, take time to sit down with a reputable real estate professional in your area and discuss your financial situation and your housing needs and goals.