Perhaps you have always conscientiously avoided debt, or you are a recent college grad with a good job but limited or no credit history. While credit history and your credit score weigh heavily when mortgage lenders decide to give you a loan, it is still possible to buy a home without a traditional credit history. Here are three ways to buy a home when you have no credit history:
Apply for an FHA Loan
FHA loans are typically available to first-time home buyers and are backed by the federal government to mitigate risk. For this reason, they are often easier to qualify for than conventional loans and can be a great option for home buyers with no credit history. You can apply for an FHA loan through your mortgage broker, and read more about the program on the official website.
Come up with a Large Down Payment
The larger your down payment and the smaller your actual mortgage, the less of a risk you will be to mortgage lenders. For this reason, putting down a larger down payment than you were intending to can help you get a great loan without a credit history because the down payment helps counteract the riskiness of lending to someone without a credit history. Your mortgage lender will help you determine the down payment percentage to aim for, depending on your local market and your home budget.
You may need to spend several months saving up before you can buy, but it will be worth it when you are approved for a mortgage. Some options for coming up with a large down payment include temporarily moving in with your parents to save money, starting a side business such as freelance web design or writing, or asking friends and family to contribute to a down payment fund instead of a traditional gift registry if you are getting married soon.
Ask About Alternative Credit
Some mortgage lenders offer alternative credit programs. These programs vary by lender but typically involve allowing you to input non-debt bills into their system in order to show that you make timely payments and are financially responsible. These programs usually focus on rent and utility bills and will require the participation of your landlord or utility companies.
By following these tips and working with a qualified mortgage broker, you will increase your chances of home ownership even without an extensive credit history. For more information on mortgages, check out companies like SWE Homes.