How to Buy a Home with No Credit

A lot of attention is given to homebuyers with poor credit. But there are also plenty of people who would like to buy a home who have no credit. Thankfully, there are still workarounds that let you move forward with your home purchase before you establish credit. In this post, we will go over how to buy a home with no credit.

Who Needs No Credit Home Loans?

Before we discuss how to proceed, here are some examples of people who may need a no credit mortgage.

• Homebuyers who have never used formal credit accounts, and have therefore never accrued a credit history.

• People who have too sparse a credit history to be useful.

• Immigrants who have not established credit in the US.

There are a lot of scenarios where a person may simply not have had the opportunity to participate in the system, or chose instead to rely on cash purchases. Just because a person does not have credit, that does not mean they are not capable of making timely payments and affording a home.

Now let’s talk about what you will need to buy a home with no credit.

1. Gather documentation. Provide proof of the last 12 months payments for 3 ‘Non-Traditional’ credit tradelines, like the examples listed below. This shows proof of a payment history, even if it’s on items that don’t typically report to the credit bureaus.
   • Rent payments
   • Utilities payments
   • Phone or internet bills
   • Insurance payments
   • Etc.
     
     If you are not sure whether a particular type of payment history will be acceptable, just ask. In addition, you will need to verify your income and employment status. You can do this using pay stubs and tax documents if you are an employee. If you are self-employed, you will need to provide bank statements in lieu of a W-2. Combined, this information shows that you have the means to afford a home, and that you can be counted on to make your mortgage payments in full and on time.
2. Save up for a down payment. Homebuyers with no credit can expect to have to make a down payment. Many lenders will require you to put down 20% or higher since they see you as a high risk borrower. McGowan Mortgages offers a no credit mortgage with a down payment as low as 3.5%. That way, being unable to make a large down payment does not have to shut you out of the chance to buy your own home. If you want to make a larger down payment, however, you can do that. It may help you qualify for a more competitive interest rate. It also could result in lower monthly payments on your mortgage.
3. Work with a mortgage company that can accommodate you. Not every mortgage company works with borrowers who have low credit or no credit. The big banks often turn away customers who do not fit within fairly narrow parameters, and may not even know how to work with a no credit homebuyer. You will need to choose a mortgage company that offers no credit mortgages. The more experience they have serving no credit customers, the better. A mortgage company that has successfully completed this process with other homebuyers will be able to walk you through it quickly and easily, step by step.

Buy a Home with No Credit

McGowan Mortgages offers many specialized loan products, including no credit mortgages. To find out more about no credit home loans or to apply now, give us a call at (816) 631-9687 to schedule your consultation and begin the mortgage application process.