Applying for a new home loan can be intimidating, especially if you have a less-than-ideal credit score. While most loan programs and lenders have minimum credit score requirements, it is possible to get a no-credit-check mortgage that allows you to qualify for a home loan with no credit. Here’s a look at what to expect from the process and the options you’ll have.
Purchasing a home is an exciting milestone. But qualifying for a mortgage can be challenging, especially if you have no credit score. A no score loan may offer the solution you need to finance your dream home.
At our company we specialize in no score loans. We understand the frustrations borrowers face when they have worked diligently to avoid debt yet can’t get a mortgage. That’s why we created mortgage programs specifically for no score buyers.
In this comprehensive guide, we’ll explain everything you need to know about no score loans, from what they are to how to qualify. With the right expertise on your side, a lack of credit score won’t prevent you from achieving homeownership.
What is a No Score Loan?
A no score loan is a mortgage designed for borrowers who don’t have a credit score from any of the major credit bureaus. Lenders refer to these buyers as “credit invisible.”
You may have no score for several reasons:
- You’ve avoided debt and credit cards to stay debt-free
- You recently immigrated to the U.S. and haven’t established credit yet
- You haven’t used credit for many years
Without a credit score most lenders view you as high risk and won’t approve your application. But no score loans through lenders like us provide a path to homeownership.
How No Score Loans Work
No score mortgages involve manual underwriting. This means that instead of relying on a credit score, the lender reviews your income, assets, and other financial records to assess your ability to repay the loan.
Here are some items commonly examined during underwriting for no score mortgages:
- Employment history and income
- Bank account balances and savings
- On-time payment of utilities, rent, cell phone bills, etc.
- Low debt-to-income ratio
- Sufficient cash reserves after closing
While manual underwriting takes more time, it allows lenders to fully understand your financial situation when no credit score is available. No score buyers can qualify for competitive interest rates and loan terms this way.
Benefits of No Score Loans
A no score mortgage provides several advantages for credit invisible borrowers compared to conventional mortgages:
Possible to Qualify – No score loans provide a path to homeownership that doesn’t exist with most lenders. Manual underwriting considers all aspects of your finances.
Competitive Rates – While rates are slightly higher than traditional mortgages, no score loan rates are still reasonable, often between 4-6% for buyers with strong financial histories.
Various Down Payment Options – Depending on your situation, no score loans allow down payments as low as 3% or 0% with eligible programs. Lenders evaluate down payment sources closely.
Loan Amounts Up to $548,250 – No score loans conform to standard conforming loan limits. So you can purchase more expensive homes despite having no credit score.
Alternative Credit Considered – Rent, utilities, insurance payments, and other bills can help demonstrate you’re a responsible borrower without traditional credit.
For the right applicant, a no score mortgage unlocks exciting possibilities that might otherwise be unavailable.
Qualifying for a No Score Mortgage
While each lender has their own specific criteria, you’ll generally need to meet certain requirements to be approved for a no score home loan:
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Stable income – Expect to document at least two years of steady earnings from employment or other sources. Underwriters look for reliable income.
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Minimum down payment – No score mortgages often require 10-20% down at closing. Lenders want to see you have invested savings in the home.
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Adequate reserves – After closing costs and down payment, you’ll need a few months of mortgage payments available in your accounts. Reserves provide a safety net.
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Limited debt – The lower your debts, the better. Underwriters will review any loans or credit cards balances closely to ensure you can manage added mortgage debt.
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Homebuyer education – Completing a course in advance shows you understand the responsibilities of homeownership.
As you can see, no score lending places more emphasis on income, savings, and assets over your credit reports. Meeting these guidelines demonstrates you can successfully take on a mortgage.
How to Apply for a No Score Loan
When you’re ready to move forward, follow these steps to apply for a no score mortgage:
Check your credit reports – Confirm you actually have no credit score before proceeding. You can order free reports from www.annualcreditreport.com.
Pick a specialized lender – Choose a lender like us that actively works with no score buyers. Not all lenders will attempt manual underwriting.
Get pre-approved – Pre-approval provides a preliminary loan estimate before you make offers. Underwriters will verify your income and assets at this stage.
Gather documentation – Expect to provide pay stubs, tax returns, bank statements, and anything that supports your financial position and history.
Complete homebuyer education – Many lenders require a certificate showing you completed an approved homebuyer course.
Connect with a real estate agent – Pre-approval makes you a strong buyer. A good agent will help you stay organized and negotiate effectively.
The process takes more coordination and diligence than a regular mortgage. But with the right lender, no score buyers can achieve their dreams of homeownership.
Alternatives to No Score Mortgage Loans
If you don’t initially qualify for a no score loan, there are a few options that may help you build your case:
Add an authorized user account – Ask a family member with great credit to add you as a user. Their account history may supplement your thin credit file.
Take out a credit builder loan – These special loans let you “build” credit history as you repay installments each month. The benefits outweigh the costs.
Ask for reconsideration – Work on any deficiencies indicated by underwriting, provide clarifying documents, and request another review. Don’t hesitate to appeal a turndown.
Improve your down payment – Larger down payments show greater commitment and equity in the home. A 20% down no score loan has a stronger chance of approval.
Work with a mortgage broker – Brokers have access to multiple lenders and can help you find one that will approve your unique scenario.
Request exceptions – Many lenders allow underwriters to make limited exceptions and overrides based on your overall application strength. Don’t be afraid to ask!
With persistence and the right strategy, many no score buyers can modify their situation to ultimately get approved.
Our Experience with No Score Loans
Here at our company, no score lending is one of our specialties. We understand the obstacles credit invisible buyers face. Our experienced team guides you through every aspect of the mortgage process.
Over the years, we’ve helped hundreds of no score borrowers achieve their dreams of homeownership. We know how to address the intricacies of these loans and stand by our clients each step of the way.
We’d love the opportunity to help you buy or refinance through our customizable no score loan programs. Contact us today to start a free consultation.
Frequently Asked Questions About No Score Mortgages
What interest rates can I expect with a no score loan?
No score interest rates typically range from 4-6% for well-qualified borrowers. Rates are primarily based on overall loan risk versus credit scores.
How long does underwriting take on a no score mortgage?
Manual underwriting often adds 1-2 weeks compared to a regular mortgage. Be patient and quickly provide any supplemental items requested by underwriters.
Can I still get a no score mortgage by paying all cash?
Yes! All cash offers are very attractive to sellers. Having funds to cover the full purchase price means you can close quickly without financing.
What government-backed loans are available for no score buyers?
The FHA allows manual underwriting of its flagship FHA loan program for no score buyers who meet all other requirements. No score VA loans are also possible.
Can I get a no score mortgage for an investment property?
Investment properties generally require a higher down payment and have stricter underwriting. But no score loans for investment properties are possible with the right lender.
What down payment options exist besides 10-20% down?
Some lenders allow as low as 3% down on no score mortgages for owner-occupied primary residences. Ask your loan officer about options that fit your budget.
Can I get a no score cash-out refinance to tap home equity?
Cash-out refinancing involves more risk, so lenders have stricter requirements. But no score borrowers may qualify depending on their financial profile.
The Bottom Line
Don’t let a lack of credit score deter you from pursuing your homebuying dreams. No score mortgages provide a proven path to ownership for credit invisible borrowers who can demonstrate financial strength and responsibility.
With a reputable lender at your side guiding you through manual underwriting, the process can be straightforward. You’ll also
How to prove you’re creditworthy without a credit score
In many cases, lenders will accept alternative credit histories if you don’t have the types of accounts that show up on the credit bureau reporting systems.This nontraditional credit history involves verifying your payment history on other obligations you have over the past 12 months, including contact information for all the people you’ve paid.
Keep in mind that this alternative payment history must be spotless. If there is anything derogatory on your report, like medical collections or unpaid utility bills, you won’t be eligible for alternative credit options. Here’s how a nontraditional credit history works and what lenders look for.
Absent a credit score, a lender will be most interested in how you’ve managed your rental payment history. The most recent 12 months of rent will be an indicator of whether you’re likely to pay a new mortgage on time.
You’ll need to provide a 12-month payment history with canceled checks or bank statements verifying your on-time payments. A copy of the lease will also be necessary to show that you were complying with the terms of a legal agreement, much like you will be when you obligate yourself to a mortgage.
Cash payments won’t work, and if you’re renting from a relative or friend, this won’t be acceptable for alternative credit underwriting.
Another sign that you are ready to buy a house is proof that you’ve paid utilities at your current residence on time. Again, you’ll have to show that the payments came out of your account with canceled checks or bank statements.
The utility bills should also show up in your name. If they don’t, you won’t be able to use the account as one of the options for your credit.
Other nontraditional credit items
In addition to having at least two housing-related items, lenders will want at least two to three other monthly payment histories to show that you can manage your obligations.
You’ll need 12 months proof of two to three of the following:
- Cellphone bill
- Cable bill
- Car insurance
- Life insurance
Any type of account that you pay monthly and have had for at least 12 months in your name will usually be acceptable for the additional credit items needed. In most cases, you won’t be eligible if you’ve had more than one 30-day late payment within the last 12 months of payment history.