No credit score mortgage loans? That's right. It's a thing.
So, I was on a road trip with my millennial son a couple of weeks ago. He's a 29 year old software engineer for Uber. At the ripe old age of 27 (before he went to work for Uber), he bought a condo in Cambridge, Massachusetts. A year later he was recruited to Uber and moved to Pittsburgh. He still has his condo in Cambridge, but he rents it out.
As we were driving on this 10 hour trip he started to talk about how he doesn't believe in credit scores. I was like, "what?!!"
It's a new generation. A new way of thinking. His point was valid. Why should he be punished for paying cash? Aside from his mortgage payment, he has no debt. He pays all of his bills in cash.
Apparently, if you have a nontraditional credit history, you still may be able to get a mortgage loan. Experian, for example, one of the three major credit-reporting agencies, accepts rental payment history as proof of credit history. Utility payments, insurance premium payments, cable tv services, medical professionals, and cell phone bills may also be considered.
The challenge is finding a lending institution who does manual underwriting, which is a hands-on investigation into your ability to repay debt. There are plenty of lenders who are willing to work with nontraditional borrowers. You just have to do the research and find one.
"Get the opinion of a top mortgage officer," advises Coldwell Banker Upton Massamont Realtor Rick Davitt. "That’s who I rely on to coach my clients if they don’t have a credit history. Typically a mortgage officer will recommend opening up a credit card to buy gas, groceries, clothing, and then paying the balance off monthly."
Once you have found a lender, make sure you bring proof of your income for 12-24 months, payment history for monthly expenses for at least the last four months, and proof of your down payment. Remember, the lender is taking a higher than usual risk, so a larger down payment reduces their risk somewhat.
In addition to a conventional mortgage, you could qualify for an FHA, VA or USDA loan, again, if you've paid your bills on time each month.
FHA - Federal Housing Administration. These government loans are open to everyone. Borrowers with a good payment history can qualify with a minimum down payment of just 3.5 percent of the home purchase price.
VA - Veterans Affairs, are targeted specifically to active duty members, veterans of the U.S. Armed Forces, or the surviving spouse of a deceased member of the military.
USDA - Department of Agriculture loans are specifically for homebuyers looking to buy in an area of the country the federal government designates as rural.
Our advice? 1. Do your homework. Research various type of loans. 2. Find a manual underwriting lender. Be prepared when you meet with your lender - have all the documents needed. 3. Have a decent down payment - 10%-20%.
Pamela Sclafani is the Marketing Manager for Coldwell Banker Upton Massamont. She lives in the Pioneer Valley and enjoys everything it has to offer, gorgeous scenery, hills and mountains for hiking, lakes for paddle boarding, the change of seasons, and the close proximity to Boston and New York.
Rick Davitt, REALTOR, Coldwell Banker Upton-Massamont Realtors
NerdWallet - "Can You Get a Mortgage With No Credit History?"
Dave Ramsey - How To Get a Mortgage with No Credit Score
MortgageLoan.com - "No Credit History? You Can Still Get A Mortgage."