This week on Mortgage Monday we are going to help answer a pretty big mortgage question. Can you receive a mortgage if you have a low or no credit score? In short it is absolutely possible! You can still get a loan it just won’t be a conventional mortgage loan. The loan that will be easiest to get with a low credit score would be a FHA loan also known as a Federal Housing Administration Loan. An FHA loan is a government backed mortgage that makes purchasing a home easier for first time home buyers and people with low credit scores. With an FHA loan your credit score can be as low as 580. If your score happens to be lower or closer to 500 you may be able to get the loan if you put down 10% or more as a down payment. The reason you are able to get an FHA loan with low credit is because the FHA does not loan these directly they are loaned from regular banks and lenders, but the FHA backs them up so in the event that you default the government has your lenders back.
If you don’t even have a credit score you can still secure a mortgage if you can show that you have non conventional forms of credit and have paid off all of your debts. In this special circumstance some lenders may agree to put you through a process called manual underwriting. What you will need for that are a lot of financial documents to back up that you are capable of paying credit relating things. And that you are financially responsible. Manual underwriting is hands on investigation into your ability to repay debt . As you are going through the underwriting process you will have to submit a lot of documents to prove your financial responsibility, for example proof of income and a history of rental payments.I also recommend to provide the bank or mortgage lender with several other things to assist with the underwriting. You will need to provide proof of income from 12 to 24 months, proof of steady payment history for at least four regular monthly expenses for example:
rent, utility bills, phone bills, cable bills, insurance premium payments, child care or school tuition payments. The more evidence you have with you of on time payment history the higher chance you have for qualifying for your mortgage. One last thing that will help you with getting a mortgage without credit is having a down payment from anywhere from 10 to 20 percent. This reduces the lender’s risk and demonstrates your ability to handle money responsibly. I hope this information helps with all your home buying needs and questions. And if you have anymore questions about the home buying process please contact one of our agents and we would be happy to assist you.