Can You Buy a House With No Credit?: The Facts You Need to Know

Are you wondering if you can buy a house with no credit? With over 45 million American adults considered credit invisible, it can be challenging to get approved for a mortgage or other types of loan. People without no credit have very thin credit files, without enough information to be assigned a credit score.

If you are one of them, don’t panic. There are plenty of ways to show that you are trustworthy.

Whether you are looking for a government-backed loan or borrowing from private mortgage companies, you could still get a mortgage and purchase your dream house without credit. There are numerous loan programs that accept first-time homebuyers without credit.

So, how can you purchase a home without credit? Read below for all the facts you need to know:

Buying Your First Home Without Credit History

Are you a first-time homebuyer who has never had a mortgage before?

You could have purchased your car in cash instead of getting an auto loan, or you prefer using debit cards instead of credit cards. Unfortunately, one of the unintended effects of living a debt-free life is that you may not be qualified for any loans.

Sadly, it’s hard for mortgage lenders to trust you without visible consequences that you can pay back a loan and effectively manage your credit. They are often nervous about your ability to repay their loan, whether you are employed or not. Call it fear of the unknown, as they don’t have any history to check.

While it’s challenging to get a mortgage in this position, traditional credit profiles aren’t always required to get a mortgage. There are numerous lending programs, such as the FHA Mortgage, that will work with first-time borrowers with thin or no credit history.

There are also real estate companies such as URB Chicago that support potential buyers without a credit history. For more information about URB Chicago, check it out here.

Thankfully, most mortgage lenders today offer these loans, but you will need to shop around for one with significant policies. Another great option would be conventional mortgages, USDA, and VA loans. But keep in mind that the qualifying requirements and rules governing these loans could be quite strict for individuals with no credit history.

Additionally, it can be quite challenging to find a lender willing to give you a loan. And thanks to the effects of COVID on businesses, it’s even more challenging today.

What Are The Eligibility Requirements For Borrowers?

Buying a house without a credit check can be quite challenging. While you may get around the problem by opting for loans that don’t require traditional credit profiles, most lenders still need proof that you can repay the loan. Everyone is in business, and they want to make sure they are making a good investment by lending you money.

Just like with other types of loans, you will need to show lenders proof of your personal finances. These documents prove that you can afford to repay the mortgage. For instance, mortgage lenders need to see the following documents:

• Proof of steady employment
• Your bank statements showcasing your assets
• Some cash reserve in your bank to be used for emergency
• Enough savings for closing costs and a down payment
• Personal tax returns to prove a steady income source

Instead of requesting a traditional credit report, a mortgage lender may ask for proof of other financial obligations that aren’t often reflected on your credit history.

By sharing all the above items, mortgage lenders will determine your ability to repay the loan. Additionally, paying your utility bills, rent, internet, and cell phone payments on time could prove that you are a responsible borrower.

How Will Your Rent Payments Help?

Your rent payments are essential for a no credit check home sale. Lenders use them to check whether you can keep up with your mortgage payments. However, word-of-mouth alone will not suffice.

You will need to verify that you have an excellent rental history through the verification of rent (VOR). The lender will ask your current and past landlords for your VOR. This document shows how long you have lived in your current home, whether you have been late on any rent payments and the amount of money you pay.

If you are looking to be a homeowner in the future, one of the most essential house-buying tips is to maintain a strong VOR. That’s because it makes a huge difference in your mortgage lender’s final decision.

However, your rent payments aren’t the only essential factor to consider. Ensure you also pay other bills on time, such as your auto or student loans. These payments could significantly affect your mortgage approval.

Will A Mortgage Without A Credit History Cost Me More?

A borrower with no credit history can’t pay the same interest rate as someone with excellent credit history. Unfortunately, you will likely pay more for your mortgage loan. The lender can’t trust you because you don’t have a history to compare with.

Hence, they will be taking a higher risk by lending you money. For this reason, you will likely pay more in terms of interest rates and higher mortgage insurance premiums. The insurance will cover your mortgage in case you default.

Hence, people with a long and excellent credit history will pay lower interest rates and premiums compared to you. But these expenses also play off each other in that getting mortgage insurance helps reduce your interest rates.

Now You Know How To Buy A House With No Credit

Almost anyone with thin or no credit is asking, “Can I buy a house with no credit?” The answer is yes, and you can purchase a house without credit as long as you document your finances. Numerous loan programs can help you buy a house with no credit; you just need to do your research thoroughly.

Did you enjoy this article? Check out other posts on our sites for more informative tips.

Kenneth

Kenneth is a proud native of sydney, born and raised there. However, he pursued his education abroad and studied in Australia. Kenneth has worked as a journalist for almost a decade, making valuable contributions to prominent publications such as Yahoo News and The Verge. Currently, he serves as a journalist for The Hear Up, where he focuses on covering climate and science news. You can reach Kenneth at [email protected].