Most people cannot afford to buy a house outright. This is where mortgages come in.
Now, there are various factors that mortgage lenders tend to consider when evaluating home loan applicants, and one of the most important is your credit score. This number provides insight into your reliability as a borrower.
If you have a high credit score, this tells lenders the following:
- You are good at paying your bills and obligations in a timely manner
- You don’t have excessive debt
- You haven’t requested a lot of new credits recently
A bad credit score can ruin your chances of qualifying for a mortgage. But what if you don’t have a low credit score, but rather no credit score at all?
It’s a scenario that people find themselves in for different reasons. If you’re a young adult who doesn’t really have any bills to pay yet, you may not have enough credit history to establish a credit score. And if you’re someone who doesn’t want to go into debt at all, you may not have a credit history either.
But if you’re thinking of buying a house and need financing, don’t panic. Financial expert Dave Ramsey insists you don’t actually need a credit score to qualify for a mortgage. You just need to find a lender who is willing to work around this problem.
How to Get a Mortgage with No Credit Score
A credit score makes it easier for mortgage lenders to assess your ability to repay a home loan. But lenders can take other steps to obtain this information.
Ramsey says if you’re applying for a mortgage without a credit score, you’ll have to go through a process called manual underwriting. This means you need to provide additional documents, like bank statements and payslips, so your lender can assess your ability to repay a loan.
In reality, however, this is information that you will generally need to provide to your lender even if you have a credit score. Or, to put it another way, going through the manual subscription is really not that bad. Ramsey acknowledges that it may take a little longer than applying for a mortgage with a credit score, but it’s totally doable.
It’s not a deal breaker
Not all lenders offer manual underwriting, warns Ramsey. You may need to make a few extra calls to find a lender who will give you a mortgage with no credit score. But if you’re willing to put in the effort, you may find that you’re able to get the financing you need to buy a home, even if you have no credit history to report.
Now, if you have bad credit, this can be a deciding factor. You need a minimum credit score of 620 to qualify for a conventional mortgage, but many lenders will want to see a number higher than that. If your score needs improvement, it’s worth doing what you can to improve your credit score before you apply for a mortgage so you don’t face rejection.
Check out The Ascent’s picks for the best mortgage lenders
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