Limited Or No Credit
Limited or no credit - Some borrowers have limited or no credit listed on their credit report. This can effect the ability of a borrower to have a credit score and a borrowers ability to obtain financing for a mortgage. Some lenders offer programs for these borrowers with limited or no credit. These lenders will allow the usage of a letter from rental companies, utility providers, cell phone providers, and many other types of debt to demonstrate a good payment history. Consult a mortgage professional for more information.
Another way to gain credit is through a secured credit card. This is a credit card that is issued to you based on a deposit you put down.
When you have limited or no credit one of the easiest ways to establish credit is to have a family member add you onto a credit card so that you can start to gain a credit history based on their good credit. Make sure that the credit card provider reports an authorized user to the credit company before doing this.
No Credit History - A borrower with no credit history may be someone who chooses to pay cash for the bills. It is possible to show a credit history that will satisfy most lenders requirements.
A credit history can be established by providing at least 12-month history on the following options:
Rent, Utilities, Rental agencies, Auto references, Car insurance, or you may use a co-signer that has good, established credit.
If your rent includes utilities that will count as 2 alternative tradelines with certain lenders.
There are many programs available for people who have no credit history. You can even qualify for 100% financing if you have no credit history, as long as you can provide some alternative forms of credit.
Speak with one of our mortgage professionals about the availability of alternative credit reports accredited by the NCRA National Credit Reporting Association, which may help you in qualifying for a loan with some of our lenders.
Fanie Mae's "My Community" program was designed just for people with limited credit history and will allow up to 100% financing. Keep in mind you will need to show at least 4 alternative tradelines such as rental history, cell phone, cable tv, etc.
Any accounts that you decide to use as alternative credit must be paid on time for the last 12 months. Cancelled rent checks or rental reciepts can also be used as a alternative trade line. You r mortgage broker should be able to help you decide what accounts to use.
What if I always pay cash , and have no credit? - Some people who are very responsible with their money and pay cash for everything may be surprised to find that they are not necessarily rewarded for their discipline when it is time to take out their first mortgage. Because lenders base your interest rate and their willingness to lend money on risk, they like to see an established payment history reported on your credit bureau.
There are programs available to those who have no credit history, as well as some ways to establish your credit if you are not planning to actually buy a home for 6 to 12 months. While there are many options available to you, a handful of the programs and best techniques for establishing credit will be discussed in more detail in this article.
You would think that pay cash for everything shows that you are financially responsible. The best solution is to open small credit lines to establish a credit history. Non use of the accounts will still help you establish a rating.
Some credit unions have awesome programs that will help increase your credit score.
Most lenders want to see a minimum of 3 credit tradelines on your credit report in order to extend credit to you and finance you for a mortgage. Usually, they want these tradelines to be open for at least 12 months. Therefore, paying cash for everything and not establishing credit can actually lower your chances of qualifying for the best deal and financing for yourself. Having little to no credit established does not demonstrate that you have the ability to handle repaying back debt.
You can get a mortgage even if you always pay cash and have no credit score. You will need a lender that does manual underwriting. They will want to see alternative tradelines, such as utilities and phone. The lender will most likely want to see cancelled checks for at least one year for each of these, as well as rent, to see that you pay your obligations on time. Also, you may have to make a slightly larger downpayment.
If you rent, you will want to make sure that you always pay on time and you pay with a check. Many lenders can use 12 months cancelled rent checks to help qualify you for a mortgage.
I have no credit score. Can I get a Mortgage? - Do you have no credit history but would like to qualify for a mortgage? There are numerous lenders that have no score programs for home loans, some even allow no money down. However, borrowers will be asked for non-traditional credit references such as utility payment history, telephone payment history, and other verifiable payment references.
Fannie Mae's My Community program will allow you to use alternate forms of credit such as phone bills, utilities, and rent.
When using a loan program that does not require a credit score it will become very important that your rent payments be verified. Always make sure that you are making your rent payments in a trackable and verifiable manner. DO NOT MAKE YOUR RENT PAYMENTS IN CASH. Be sure to keep a file of all rent receipts and cancelled checks. Being able to prove that you have made twelve or even twenty four months of rent payments on time will go a long way in securing a mortgage when you have no other traditional credit tradelines.
In some cases having no credit score is better than having bad credit. Many people with no scores can show a history of timely payments for accounts that do not report to the credit bureaus. Most lenders will require 3-5 forms of non-traditional credit. You can obtain a letter from any company you pay a regular monthly payment to such as: electric, water, cable, phone, ISP, gas, cell phone, etc. Even other monthly bills you pay for something like a self storage facility can be used.
The lenders that will lend money to people for a mortgage and have no credit and no credit scores are not nearly as abundant as the lenders that will lend to people with credit and credit scores. This is one reason why using a mortgage broker makes the most sense. A mortgage broker will generally know which banks have programs for consumers with no credit or credit scores and they have the ability to shop between those banks that will lend to these types of borrowers and get the best financing for you. A mortgage broker will also know what is expected and what requirements those lenders will have so that they can find the lender that will fit your needs the best.
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Information listed above is to be used for educational purposes only and is not guaranteed