How to Get a Mortgage Without a Credit Score

Did you know roughly 26 million American adults have no credit history?

That’s a lot of people!

Studies from the Consumer Financial Protection Bureau (CFPB) found that, in addition to those 26 million “credit invisible” people, there are 19 million more who have a limited or outdated credit history that can’t be scored by traditional credit bureaus such as Equifax, Experian, and TransUnion.

Translation? About 18% of the American adult population have a limited or non-existent credit history.

So here’s the conundrum: mortgage lenders typically use your credit score to determine your eligibility for a loan.

However, if you don’t have a credit score, it doesn’t necessarily mean you aren’t capable of paying back your mortgage loan. 

Why Don’t I Have a Credit Score?

If you have zero credit cards or loans and pay for things only in cash (or with a debit card or checks), you probably will not have a credit score.

A credit score is made up of a few different factors, such as:

• Payment history – How long have you been a credit user? Have you made your payments on time?
• Amount owed – How much of your credit limit have you used? How much have you taken out in loans?
• Type of credit – Do you have a mix of credit cards and loan types?
• New credit – How frequently do you open new lines of credit?

You also may not have a credit score if you’ve had credit cards or taken out loans in the past, but you haven’t used credit in more than 2 years. Similarly, if you are a recent immigrant and haven’t established a credit history in the United States yet, you won’t have a valid credit score.

Another possibility is simply that you’re young, and you haven’t had much experience with credit yet. Maybe you took out a student loan to cover your college tuition, but you haven’t gotten a credit card yet – that may not be enough credit history to generate a credit score.

While these situations (and possibly others) may mean you don’t have a credit score, they don’t mean you’re not ready and able to buy a house, and consequentially take out a home mortgage loan.

Can I Still Get a Mortgage with No Credit?

In short, if you are otherwise qualified, yes! What do we mean by “otherwise qualified”? Read on to learn more.

Waterstone Mortgage offers a Non-Traditional Credit Program, which allows you to qualify for a mortgage based on other indicators of payment history, which we’ll call “payment references.”* These can include:

• Cell phone bill
• TV/cable or internet bill
• Rent history
• Utilities that are not included in your rent payment, such as gas, electric, or water
• Insurance premiums that are not payroll-deducted (may include medical, auto, life, or renters insurance)
• Childcare provider payments
• School tuition
• And more!

While, of course, a credit score is useful for determining a homebuyer’s ability to pay back their mortgage loan, the above indicators can be extremely helpful in telling your story – which is great news if you’re one to typically pay in cash or haven’t utilized a line of credit in a while. If you pay your bills in full and on time, your history will speak for itself, and we may be able to qualify you for a mortgage with that evidence.

How Do I Know if I Qualify?

Our Non-Traditional Credit Program is available with a variety of loan types: conventional, FHA, USDA, and VA. We can help you figure out which loan type is best for your situation.

Also, keep in mind:

• The Non-Traditional Credit Program is not meant for homebuyers with poor credit; if your credit is less-than-perfect, we have other loan options for you to consider.
• All borrowers (people listed on the loan) must have no credit history to qualify for this program; if one borrower has no credit history and the other does, we can help you find another loan option.
• One of your payment references MUST be a rental housing payment; if you do not have documented proof of current rent payments, you cannot qualify for this program. (So, for example, paying cash for your rent is a no-go.)
• Payment references must span the past 12 months (and each must be paid at least every three months).

As with any home loan program, there are a lot of details that go into determining if you may qualify or not. For more specific information and to discuss your unique situation, find a Waterstone Mortgage loan originator in your area.

*Payment references should have a minimum of 12 months. This program is not intended to overcome bad or delinquent credit history.

This article is presented to you by Waterstone Mortgage. Please click here to read the full article.