How to Get a Mortgage with No Credit History
Use the Code Below to Embed this Infographic into Your Website!
If you are ready to buy your first home but you have not yet established a credit history, you might find that your choices are limited. To some lenders, having no credit is the same as having bad credit since there is no real way for the lenders to analyze their risks. Fortunately, it is not impossible to get a mortgage with no credit history since is relatively simple to establish credit, and many lenders look at factors other than your credit rating.
Get a Credit Card
One of the best ways to establish credit quickly and in the right way is to pick out a credit card that suits your needs. Often, if you have bad credit, it is not too difficult to find a company willing to give you a credit card with a limit under $500. The goal here is to use the card wisely once you receive it. To build your credit rating, spend about 25% to 30% of the limit and make all of your payments on time. Remember that it looks better for you to make a little more than the minimum payment each month without paying off the balance in full. It is important to maintain a low running balance at all times in order to boost your score.
Contact a Private Lender
Another way to get a mortgage with no credit history involves finding a private lender that offers agreeable terms. The rates associated with most private lenders are higher than those associated with traditional financial institutions, but this is still a great way to get off the ground in terms of buying a house. For instance, if you can get a mortgage with an 8% interest rate, you can make timely payments for the first year or two until you have established your credit. Then, it is always possible to refinance your loan through a traditional lender to get a better interest rate.
Find a Flexible Lender
If you want to get a mortgage with no credit history, then flexibility is important for both you and your lender. For instance, while some financial institutions will focus almost solely on your credit score, some will consider other factors. If you have not yet established a credit history but you have been with the same company for several years and you have a stable income, you may find a bank or credit union willing to give you a chance. What's more, if you have personal references, these can go a long way toward helping you secure your mortgage.
Save, Save, Save
Last, and the best piece of advice for anyone who wants to get a mortgage with no credit, save up 10% to 20% of the total purchase price of the property you want to buy as a down payment. Whether you have bad credit, no credit, or good credit, being able to provide a large down payment mitigates some of the risk that the lender takes on by providing you with a mortgage. For those with no credit history, it helps in securing a lower interest rate, too.
Although it may be a bit more difficult to get a mortgage with no credit, it is not impossible by any means. Any or all of the aforementioned methods can help you get your dream home or property with an interest rate and monthly payment you can live with.