As a Farmington home mortgage lender, we are here to help you navigate through common credit questions. Probably the most common requirement you hear about whenever you hear about mortgage lending and credit providers is needing to check your credit if you want to own a home one day. What you're usually told afterwards is that you can't buy a home without great credit, and you must have a great FICO score in order to do that. But what if you don't have a credit score? Are you then shutout from the housing market? While you may have to look in a few different places to find a mortgage lender if this is the case, you can still get one.
It's important to understand that the no credit score people in this case are people who've avoided debt. They could be people who either didn't attend university or didn't take out a student loan to do so; people who've decided against getting credit cards, or even people who buy cheaper vehicles without using auto loans. In doing so, their financial activities are not reported to the three credit bureaus, and it can put them at somewhat of a disadvantage. If you’re one of those people, what you should do is keep a record of all the bills you pay whether it's your current housing rent, the utilities, insurance or other important payments you make that aren't reported to the credit bureaus. Your ability to make these payments and avoid other common problems such as bank account overdrafts, insurance lapses and tax errors will be critical in obtaining a mortgage from the mortgage company you go with.
If you’re one of those people who fear they can't qualify for most traditional mortgages, should you go with the one that the Federal Housing Administration (FHA) backs? An FHA mortgage may or may not be right for you depending on what's available in your local area and what you qualify for. There are also VA and USDA mortgages for current and former military members and rural inhabitants which also allow for non-traditional credit checks. Qualifying for these mortgages usually is made to be very easy because the lender can approve you if you can produce records of income and payment history meet the loan's requirements, and the down payment on the home only needs to be 3.5℅ of the final price you agree to purchase it for. It's usually better to make a bigger down payment than that. But an FHA mortgage could also be a bad deal if you end up being charged higher interest, and you could also run into hidden fees in the closing costs that you may not want to deal with.
If you've checked around on FHA mortgage rates and don't like what's available to you, you may want to check to see if you can find a manual underwriting mortgage lender. These lenders will comb through the last two years of your income and bills that you've paid, and if you meet their alternative credit check requirements and prove to be financially stable, you stand a good chance of approval. Now you may need to offer a significantly higher down payment of more than 10℅ or upwards of 20℅ to increase your chances of approval. But usually a manual underwriting mortgage company will offer competitive interest rates that can be more favorable than FHA or other subprime mortgages.
Need help to prequalify for a mortgage loan? We're here to help! Ask us about a Farmington mortgage loan.