Compare Services for Free Credit Reports.

Reviews Of Top Free Credit Report & Score Sites. We've Tried Them All - Highlights: BBB Accredited Business, Provides E-Mail Alerts
Free Credit Score

Can You Purchase a Home with No Credit Score?

FHA Loan Feature Allows Buyers to Buy a Home with a Zero Credit Score

Can you buy a home with no credit score? Learn how to overcome a zero traditional credit score to take advantage of historically low rates and home prices to become a first time homeowner with a government insured FHA mortgage loan.

According to the Housing and Urban Development press release HUDNo.10-153, "Home affordability in the U.S. remains near the most attractive levels in 10 years." When home prices reflect a buyer's real estate market, it may be a good time to buy your first home. So why are more first time home buyers not joining the leagues of home owners? There are millions of Americans who, for a variety of reasons, have no or very little traditionally reported credit. These "credit underserved" people, as they are defined, often believe that their lack of credit limits home buying options. However, for many "credit underserved", it is possible to use alternate credit to obtain a FHA loan with no credit score.

Instead of traditional credit report scoring, FHA lenders who underwrite and lend to borrowers who have no credit scores will want to see an "alternate credit" history. Alternate credit is a history of payments made to creditors, companies, or even landlords that do not report payment histories on a traditional credit report. Typically, the lenders will request 3-5 of these alternate credit references. These references that you supply to the lender should reflect that you have made payments on time for at least the most recent 12 months. They can be pay histories from the company, cancelled checks for payments that you have made or simply a letter on the company's letterhead stating that you have met your obligations for the last 12 months.

See also  How to Re-Establish Your Credit Using Secure Credit Cards

Identifying these sources can sometimes be challenging for first time homebuyers. Examine your checkbook or monthly bank statements for reoccurring bills. These can be payments to utility companies, cell phone, internet companies, landlords or rental companies, car insurance, rent-to-own and "buy here pay here" auto dealers to name a few.

By presenting verifiable alternate credit to your lender you will overcome not having any credit score. Alternate credit references build a payment history for the underwriter to review as he or she considers your likelihood of repayment. While the other standard FHA loan requirements such as income verification, debt to income calculations, 3.5% of the purchase price for down payment on the home and an appraisal must also be considered as the mortgage application is reviewed, using alternate credit sources helps many overcome the credit requirements of an FHA mortgage loan.

HUD Press Release No. 10-153

Credit scoring and the credit-underserved population

Disclaimer: We work hard to offer you valuable and reliable information about all of the products and services we review. In order to provide you with this free service, we use links on our site that provide us with commissions for referring you to the seller's site. We guarantee that this does not influence the material we present, but may influence the positioning on our site, and only supports our efforts to offer you the best and most relevant information possible

Copyright © All Rights Reserved 2023
By using our content, products & services you agree to our Terms of Use and Privacy Policy.
HomePrivacy PolicyTerms of UseCookie Policy
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram