How to Get a Mortgage With No Credit Score Through Manual Underwriting

Having no established credit score can present challenges when trying to get approved for a mortgage. Most lenders rely heavily on credit scores to assess loan risk. But going through a manual underwriting process can help you secure home financing even with no credit score history.

Manual underwriting takes a deeper look at your financial profile beyond just your credit report. While time-consuming, it may open up mortgage options if you have limited or no score due to living debt-free. This guide explains what manual underwriting entails and how no score borrowers can qualify.

Why You May Have No Credit Score

There are a few common reasons you may find yourself with no credit score:

• You’re new to credit – If you’re a younger borrower just starting out, you may not have enough credit history yet to generate a score. Generally you need at least six months of credit activity.

• Only authorized user accounts – Being only an authorized user on someone else’s credit card doesn’t establish credit in your name. You’re not responsible for the account.

• No borrowing history – If you avoid debt and pay 100% in cash, you won’t have active trade lines to factor into your score.

• Only foreign credit history – Scores from other countries don’t transfer You must build US. credit.

• ** credit freeze** – Freezing your credit reports to prevent fraud also prevents activity from being reported

• Fraud victim – Sometimes clearing up identity theft means resetting your credit reports completely.

If any of these cases apply to you, don’t worry. Mortgage approval is still possible without relying on a credit score.

How Manual Underwriting Works for No Score Loans

Manual underwriting is when an actual person – not just a computer algorithm – reviews your full financial profile to decide on loan eligibility. Here’s what’s involved:

• Providing documentation – You’ll need to supply documents that reflect your income, assets, liabilities, and payment history.

• Underwriter review – The underwriter analyzes your documentation, credit history, income and debts by hand to reach an approval decision.

• Individual assessment – Each applicant is reviewed case-by-case based on their unique situation. More customize than automated underwriting.

• Compensating factors – Aspects like your assets, down payment, and stability can offset limited credit history.

It takes more time and paperwork but allows lenders to look beyond just your credit score at your overall financial responsibility.

Building Non-Traditional Credit History

When you have no credit score, the underwriter needs alternative indicators that you pay obligations reliably. This is known as your non-traditional credit history and can be established a few ways:

• Rent payments – On-time rent payments over at least 12 months. Landlord references help.

• Utility bills – Gas, electric, cell phone bills in your name prove you pay monthly expenses on time.

• Insurance premiums – Like health, life, renters, or auto insurance consistently paid builds credit.

• Medical bills – Keep records showing you pay health expenses and doctors’ bills reliably.

• School tuition – Your history with paying school tuition bills demonstrates financial responsibility.

• Subscription services – Gym memberships, Netflix, Amazon, etc. paid consistently helps as well.

Documentation like receipts, statements, and reference letters from sources that show 12 months of on-time payments establishes your ability to manage financial obligations.

Other Key Factors Besides Your Credit Score

Along with your non-traditional credit history, underwriters evaluating no score borrowers look at other important aspects:

• Income/employment – Steady verifiable income and stable long-term job tenure are ideal. Underwriters will verify this through your employer, tax returns, and pay stubs.

• Assets and reserves – Funds for a down payment and closing costs along with 3-6 months of mortgage payments in reserves helps offset limited credit. Account statements prove you have liquid savings and assets.

• Low debt-to-income ratio – Keeping total monthly debt payments low relative to your gross monthly income demonstrates you live within your means.

• Compensating factors – These could include anything extra that shows your creditworthiness like retirement income, disability benefits, homeownership history, etc.

• Down payment – Ideally 20% or more of the home’s purchase price to lower the risk of default.

While each lender has their own guidelines, most want to see a combination of strong income stability, low debts, some assets, and a down payment to approve a no score mortgage.

Sample Documentation Needed for No Credit Score Loan

Depending on the lender, you may need to provide:

• Bank statements reflecting payment history

• Copies of utility bills in your name

• Proof of rent paid on time for 12+ months

• Tax returns showing consistent stable income

• W-2s and recent paystubs verifying employment

• Letters explaining any credit report issues

• Statements showing assets like retirement accounts

• Records proving any regular debts are paid satisfactorily

Providing as much documentation as possible that establishes your financial credibility is key to no credit score loan approval.

Tips for Getting Approved for a Mortgage With No Credit Score

Here are some tips to boost your chances if you need a no score mortgage:

• Check for credit report errors – Make sure there are no mistakes holding down your scores. Dispute any false items.

• Build non-traditional credit – Open utility/cell phone accounts and make 12 months of on-time payments.

• Add your rent to credit reports – Many bureaus allow this with landlord confirmation of timely payments.

• Become an authorized user – Ask a family member with good credit to add you to a credit card. It won’t give you a full score but creates a credit history.

• Make a larger down payment – At least 20% down shows lower risk and gives you the best mortgage rates.

• Work with a specialized lender – Find one that offers alternative credit programs and is experienced with no score underwriting.

With proper documentation of your income, assets, and responsible payment history across housing, utilities, and other bills, a lender can manually approve your mortgage application even with no credit score.

The Bottom Line

The lack of a credit score or limited credit history presents obstacles but is not an insurmountable barrier to mortgage approval. Following the manual underwriting process gives lenders the opportunity to look at your entire financial picture – not just a score.

Building a portfolio showing timely payments of rent, utilities, and other bills can verify your creditworthiness when you have no established score. While it takes more time and paperwork, manual underwriting allows nontraditional credit borrowers to achieve homeownership.