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Can you get an FHA Loan with No Credit Score?

Can you get an FHA Loan with No Credit Score?

Some homebuyers cannot get an FHA loan approved because they don’t have enough credit history; or no traditional credit history at all.

This is where the no credit score FHA loan program comes in.  There are mortgage lenders willing to accept your thin file if you can afford to pay mortgage payments and other cost associated with a mortgage.  

Eligibility Requirements for FHA Loan with no Credit Score:

You might be able to get around without having a credit score. However, mortgage companies still need proof that you’ll be able to pay your monthly payments. They want to know whether they’re making a good investment.

Like other borrowers, you’ll have to record your finances to show you can manage the mortgage cost. For instance, they will check:

  • Stable job
  • Steady income reported by your pay stubs and W-2’s
  • Funds for the upfront payments and closing costs
  • Reserve funds in case of emergency
  • Bank statements documenting your assets

Instead of a traditional credit report, mortgage specialists might consider other obligations that normally don’t appear in your credit history.  Other types of credit (utility bills/car insurance/cell phone bill, etc.) These are considered non-traditional types of credit that might demonstrate you’re a capable borrower.

FHA Loans with no Traditional Credit:

Building a good credit score takes time. If you’re prepared to purchase a home but you have zero credit score, waiting until you have developed a good credit history could feel slow and disappointing – particularly in real estate, where house costs are rising quickly.

The solution is to find a mortgage program for borrowers with no credit score.   An FHA mortgage can be a good option.

FHA does not lend money for a mortgage loan.  FHA insurances the mortgage once the lender has approved the loan and the loan has closed.  FHA provides the lender with guidelines to follow during the lending process which will help the lender make the best credit decision with the least amount of risk.  FHA provides guidelines for a lender to use if they have a borrower without a credit score.  If that lender decides they want to offer this option, then an FHA loan can be done as long as the borrower can meet the approval requirements needed.  An FHA loan has many benefits to a home buyer starting with the low-down payment of 3.5%.

Which Lenders will Provide Loan with No Credit Score?

Credit unions, local banks, and specialized lenders can be more flexible than other big companies. Or find a mortgage broker. These lending experts work with various companies and approach a wide range of mortgage products. They’ll know which loan company offers the right programs and consider applications with no credit score. They can also assist you with finding the best interest rates by assessing your financial condition.

Do Mortgages with No Credit Score cost more?

Homebuyers with little or no credit history usually pay a higher interest rate than borrowers with good credit scores.

But it doesn’t mean you should not get a mortgage. You can still become a homeowner by sending a worthy application.

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Dylan and Rhonda:

Meet Dylan and Rhonda:

  • Married couple; he’s 39, she’s 34
  • He’s a physical therapist, she’s a nurse
  • Two children
  • Bought in 2021

Had they waited this would have been their cost.

table
Sourced: Keep Current Matters, Freddie Mac, Fannie Mae, and MBA ;**Average projected mortgage rate for 2022

Factors in average projected home price appreciation for 2022 at 6.27%

Bottom Line

When asking if you should buy a home, you probably think of the non-financial benefits of owning a home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.