Thinking about buying a home with but don't have any credit history? Striving to live debt-free is a commendable goal. However, it now leaves you facing the unintended consequence of not having any established credit history.
Not having any credit history or a credit score is a hindrance to getting a home loan as these are two of the factors that are typically reviewed when applying for a home loan.
Still, buying a home with no credit is still possible! There are ways to quickly build credit as well as other ways to qualify for a mortgage, even without any credit history.
Perhaps you've heard that job history is enough to qualify for a mortgage when you don't have any established credit. Let's explore why it may not be sufficient.
Your credit history confirms to lenders your ability and trustworthiness repay your debts on time and in full. It also shows them that you aren't financially overextended and that you have the means to repay the money they are loaning to you. It also indicates that you have been financially responsible for some time as it a good credit score takes time to build up. Essentially, the longer you manage credit obligations, the higher your credit score will be.
Although a stable work history is a critical component to qualifying for a home loan, it does not take the place of credit history.
Credit history is made when companies or organizations communicate to the credit bureaus about your payment history with them. One way to do this is by asking your landlord to report your on-time rent payments each month to at least one of the credit bureaus. Many of the larger landlords will gladly do this for you.
However, if your landlord is unable or unwilling to report to credit bureaus, consider applying for a credit card or taking out a small loan to build up your credit history in the traditional way.
Don’t give up your dream of owning a home if you prefer not to take out a loan or credit a credit card. Government-backed FHA home loans are backed by the Federal Housing Authority, and they have different minimum credit score requirements!
According to their website the "lack of a credit history, or the borrower’s decision to not use credit, may not be used as the basis for rejecting the loan application."
Instead, FHA guidelines say that the applicant's eligibility should be based on the "whole package"– not just as a credit score! Another benefit of FHA loans is that they only require a 3.5% down-payment to purchase.
If you don't have established credit and are looking to buy a home soon, contact us for trusted advice on how to make that dream happen as quickly as possible. Find our contact information on the home page and get started today!