If you want to buy a house but don't have established credit, you may worry that the goal is impossible to achieve. But you can successfully be approved for a mortgage by showing the lender your strengths without resorting to a credit history. How? The trick is to tell the story of your creditworthiness. Here are four steps to do this.
1. Find the Right Lender. For the best chance at a good mortgage loan in this specific situation, work with a lender that specializes in 'no credit' financing. These lenders are primed to look at factors that many traditional loans don't take into consideration. They will not be put off by your credit challenge but will instead be ready to work with you in other areas.
2. Reduce Your Loan Needs. Any potential homeowners in an unusual situation should begin by keeping their loan request as low as possible. A lender might be much more willing to take more of a risk for a $50,000 mortgage than for $500,000. You can manage this number in two ways. First, save up a higher down payment than you might feel is absolutely necessary. This puts higher-value homes within your reach. The second way is to opt for a slightly lower-cost home.
3. Show Your Income. If you want a loan, you need to show the lender that you can be relied upon to repay it. One key way to do this is to show your income is sufficient and long-lasting. Document your income in a variety of ways, including several years' worth of tax returns, paycheck stubs, or financial statements from a business. These income sources should show that you have a regular, reliable income that will more than meet your mortgage obligations.
4. Demonstrate Your History. While you may not have official credit report items, you probably do have a history of on-time payments to others. Look for ways to demonstrate this, such as with a history of on-time monthly rent payments, utility bills, informal personal loan payments, or tuition payments. The more documentation you have for alternative payment arrangements, the better.
If you follow these few steps, you can create a clear story that tells a mortgage finance company what a great borrower you will be. And then, rather than waiting for the 'perfect' situation, you can start on the dream of homeownership when it most suits you.
To learn more, contact a company that offers no-credit financing for homes.