How To Get Approved For FHA Loans With No Credit Scores

Gustan Cho Associates are mortgage brokers licensed in 48 states

Gustan Cho Associates are experts when analyzing consumer credit reports. Since we do not have lender overlays, we see all types of credit scores. Many loan officers can close a 780 credit score, 20% down payment, and W-2 income borrower in their sleep. The same is true with our team. However, we specialize in helping clients who may not have perfect credit or even any credit.

In this blog, we will detail how to obtain a mortgage if you do not have any credit or less than perfect credit. We will also explain how to apply for a mortgage with our team, even if you do not have a credit score.  The process is not difficult, just slightly different than your everyday mortgage program. In the following paragraphs, we will be discussing how to get approved for FHA loans with no credit scores. We will explain how the mortgage process works on FHA loans with no credit scores.

Get Approved For an FHA Loan With Bad Credit

What Is The Lowest Credit Needed For a HUD Home Loan?
he Lowest Credit Needed For a HUD Home Loan

HUD, the parent of the Federal Housing Administration, has the most lenient guidelines for home loans. HUD, the parent of FHA, allows borrowers to qualify for FHA loans with no credit scores and/or no active tradelines. The reason why some people have no credit scores is that they never opened up a traditional credit account.

HUD understands some folks who are financially responsible do not want to do anything with credit. Borrowers with no credit scores and/or no credit tradelines are eligible to qualify for an FHA loan with non-traditional credit. Needs to be a manual underwrite and cannot have any derogatory credit tradelines.

Apply With The Best FHA Lender For Bad Credit

Can You Get Approved For FHA Loans With No Credit Scores?

Our team receives many phone calls from clients who do not have a credit score. It may sound like an oxymoron, but if you pay cash for everything your entire life, there is a good chance you do not have a credit score. Not having a credit score is not treated the same as having a less than perfect credit score. But that does not mean we cannot work with you.

Since our broker team has a no overlay lending platform, we are able to assist borrowers who do not currently have a credit score, or even work with you if you only have two credit scores (this is more common than you may think. Not every creditor report to all three major credit bureaus).

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How Do They Calculate Credit Scores For Mortgage?

Typically, a credit bureau will not produce a credit score for you if you have no items to report for six consecutive months. If that is the case, when we pull your credit, we will see specific notes from the credit bureaus stating there is not enough data to furnish a credit score. If your credit scores are frozen at the credit bureau level, then you must unfreeze your accounts.

Once unfrozen from a credit freeze, we can pull in an accurate credit report. The following agency guidelines are only true if the specific verbiage is shown on your credit report and will not apply if your scores are simply frozen with the bureaus. We understand credit scores and other items on your credit report can be incredibly confusing.

Qualify Today For an FHA Loan and Go Shopping For a House

When Do I Contact a Loan Officer To Qualify for a Mortgage?

There is no specific time that you MUST contact a loan officer. Once you have decided you want to become a homeowner in the near future, we recommend you contact a loan officer as soon as possible.  We strongly recommend you reach out to our team via a phone call for specific questions surrounding your credit report. We have analyzed thousands of credit reports. The team at Gustan Cho Associates knows how to analyze your report to qualify for a mortgage. If we cannot get your pre-approved based on items on your report, then we will send you a detailed road map to qualify as soon as possible.

Get Qualified Today For an FHA Loan

How Can You Get a Mortgage With No Credit Score?
Get a Mortgage With No Credit Score

If you do not have a credit score, how do you get a mortgage? This is a question we receive quite often. The process is simple and should not deter you from applying for a mortgage at Gustan Cho Associates. If you are certain, you do not have a credit score because of a lack of tradeline, there is still hope.

The secret to getting a mortgage without a credit score is the use of non-traditional tradelines. A non-traditional tradeline is method lenders are allowed to use to verify payment history for establishing credit. You may utilize monthly bills such as your cell phone bill, auto insurance, and rent to verify with an underwriter that you are financially responsible and able to pay your obligations on time.

What Are Considered Non-Traditional Credit Tradelines?

The process for using nontraditional credit is simple. You will need to produce three tradelines showing on-time payments. If you pay rent, you will need to utilize your current rental payments as one of the three non-traditional trade lines. If you currently live with a family member and do not pay rent, you can still utilize a rent-free letter but must verify three other non-traditional tradeline accounts and send proof of at least 12 on-time payments to your mortgage processing team.

How Do I Prepare For The Mortgage Process With No Credit Score?

The first step in qualifying for a mortgage with no credit score is to contact a loan officer. Not all loan officers are created equal. Just because you have an NMLS mortgage loan originator license does not mean you are an expert on FHA loans with no credit scores.  Gustan Cho Associates are experts in helping borrowers get approved for FHA loans with no credit scores using nontraditional credit tradelines.

How Does The Mortgage Process Using Nontraditional Credit Tradelines Work?

The mortgage process using nontraditional credit tradelines can be done with bank statements or payment history for individual accounts. After your mortgage team receives proof of on-time payments for at least three accounts, they will then complete a “credit supplement” to verify that the information sent in is accurate. These trade lines are then added to your mortgage application and allow you to qualify. Without the use of non-traditional tradelines, it is not possible to get a mortgage loan without a credit score. In that scenario, you will want to establish credit.

Using Non-Traditional Versus Traditional Tradelines For Borrowers With No Credit Scores

Non-traditional credit is creditors such as utilities, cell phone, insurance, tuition, cable, and internet, who do not report to the three credit bureaus. You cannot have a history of late payments in the past and/or collections and/or charged-off accounts. FHA loans with no credit scores are for folks who have never had prior credit. It is not for people who had a history of disregard for credit and due to being financially irresponsible, they do not have a credit score and/or credit tradelines.

Recent College Graduates Homebuyers With No Credit Scores
Recent College Graduates Homebuyers With No Credit Scores

Recent college graduates who are eligible to qualify for a mortgage with no prior work experience or credit during their school years often do not have credit scores. As long as they were full-time students for the past two years, the time as a full-time student is equivalent to the 2 years of prior work experience on FHA loans. Many recent college graduates have no active credit tradelines and have no credit scores on all three credit bureaus. Most have never opened up a credit tradeline. Mortgage borrowers with no credit scores can still qualify for a mortgage with non-traditional credit tradelines via manual underwriting. 

Can I Qualify For An FHA Loan After Bankruptcy or Foreclosure With No Credit Scores?

Some folks went through a Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. After the bankruptcy and/or a housing event, they decide never to get credit again. Whatever they buy,  they vow to buy it in cash or not buy it at all.  These folks often do not believe in credit and re-establishing credit after their economic event. Unfortunately, having no credit is not viewed favorably by any lenders and creditors.

Late Payments After Bankruptcy And Foreclosure Guidelines To Qualify For FHA Loans

The good news is those home buyers can qualify for FHA Loans With No Credit Scores or traditional credit tradelines. As long as you were not late after bankruptcy and/or a housing event, you are eligible to qualify for an FHA loan with no credit scores.  In this article, we will discuss and cover qualifying for FHA loans with no credit scores or tradelines. Gustan Cho Associates are experts in helping first-time homebuyers and recent college graduates with no credit scores using non-traditional credit tradelines.

FHA Loans With No Credit Scores Versus Borrowers With Credit Scores

Borrowers with no credit scores can easily get credit scores by doing the following:

  • Open up secured credit cards
  • Adding themselves on as authorized credit users of family and/or relatives
  • Getting an installment loan such as auto loans or furniture credit

However, to consider having traditional credit tradelines, consumers need to have a credit account for at least 12 months

Can You Get An FHA Loan With No Credit Score?

FHA loans without a credit score. An FHA loan without a credit score is the most common loan program we utilize for individuals who do not have enough data reported by the credit bureaus to produce a credit score. FHA has offered this program long before Freddie Mac came out with theirs.

Manual Underwriting on FHA Loans With No Credit Scores 

The qualifications follow FHA manual underwriting criteria. Do not let the term manual underwriting scare you. Our team is the experts surrounding FHA manual underwriting. Since we also help borrowers inside of a chapter 13 bankruptcy, we have become experts in the manual underwriting process. You will still need nontraditional tradelines to close this FHA mortgage loan. Since this will be a manual underwrite, the debt to income and reserve requirements will be needed.

Down Payment Requirement on FHA Loans With No Credit Scores

The good news for FHA mortgage lending without a credit score as you are only required to put down 3.5% as a down payment without that you need a credit score. Since there is no qualifying credit score, your rates and fees will be based on a credit score of 580, which is the minimum qualifying credit score for a 3.5% down payment. For more information on FHA manual underwriting, please reach out to our team today. VA mortgage loans without a credit score.

Can I Get an FHA Loan With Bad Credit?

Another frequently asked question is can I get an FHA loan with bad credit and bad payment history? The answer is yes. FHA loans is the easiest home mortgage program for borrowers with bad credit. One of the most FAQs on FHA loans is can you get an FHA with no credit? The answer is YES but you cannot have a history of bad credit. FHA loans is the most popular loan program for first-time homebuyers with thin credit or no credit. The lender will use non-traditional credit tradelines when processing and underwriting FHA loans with no credit scores. Needs to be a manual underwrite.

What Does Having No Credit Mean When Qualifying For An FHA Loan?

Having no credit, means there are no credit scores on all three credit reporting agencies;

  • Transunion
  • Experian
  • Equifax

Can I Get a VA Loan With No Credit Score?

The U.S. Department of Veterans Affairs has the best mortgage program available for those who have served our country. Eligible veterans can purchase or refinance a property without a credit score. Once again, a cash-out refinance will not be allowed. With the use of nontraditional tradelines, the process for a VA loan is quite simple even if you do not have a credit score.

Why Do Lenders Ask For a Minimum Credit Score on VA Loans?
a Minimum Credit Score on VA Loans

Technically, the VA does not have a minimum credit score guideline. Many banks in lending institutions will tell you a 620 credit score to qualify for a VA loan, but that is a common lender overlay. Since there is no credit score requirement, no credit scores are definitely allowed. You will once again follow the VA manual underwriting process, which we have down to a science. If you are a veteran applying for a VA loan without a credit score, your rate will be based on a 580 credit score.

Non-QM Loans With No Credit Scores

NON-QM mortgage loans without a credit score? With the versatility throughout the mortgage markets, NON-QM mortgage lending is becoming more and more popular. That being said, some of our investors are currently allowing no credit score NON-QM programs. As of today, these programs are just starting to come out.

Non-QM Guidelines For Borrowers With NO Credit Scores

In order to qualify for a NON-QM loan without a credit score, you must verify your income with full documentation. A full documentation mortgage loan consists of pay stubs, W-2s, and tax returns. While many NON-QM borrowers utilize alternative income verification such as bank statement loans, one-year tax returns, 1099 income, asset depletion, or debt service coverage ratio loans (DSCR), you will need a qualifying credit score to use those programs. A NON-QM mortgage loan without a credit score will verify all income closely aligned with the Fannie Mae/ Freddie Mac guidelines.

How To Get Raise Your Mortgage FICO Fast

What is a fast way to establish credit? It can be difficult to obtain credit if you do not have a credit score. Typically, you will need to go down the secured credit card route. When a creditor is looking to extend credit, they typically want to see a credit score before offering you a credit card or auto loan. That being said, a secured credit card can be a great option for building credit. With limited credit history, you will more than likely need to utilize an FHA or VA mortgage loan. Conventional mortgage loans typically want to see tradelines reporting for 24 months before extending credit.

How Can I Get a FICO Score Fast?

Consumers who have no credit, thus no credit scores can easily be solved by getting two to three secured credit cards. Consumers will get credit scores reported to all three major credit reporting agencies. Mortgage lenders will not give credit towards seasoned credit tradeline requirements until borrowers have had a twelve-month credit payment history reporting to the three credit bureaus.

The good news is that even if home buyers do not have credit scores or seasoned credit tradelines that have been seasoned for at least a year, it is still possible to qualify for FHA Loans With No Credit Scores OR traditional credit tradelines reporting on the three credit bureaus.

Nontraditional In Lieu Of Traditional Credit Tradelines on FHA Loans

Borrowers with no credit scores will not have traditional credit tradelines. Credit bureaus will not give borrowers with no traditional credit tradelines a credit score. However, you can qualify for an FHA loan with no credit scores with non-traditional credit tradelines. For those mortgage loan borrowers with no credit and no credit scores, they are still able to qualify for a mortgage loan via nontraditional credit. All borrowers who do not have a credit score due to no traditional credit tradelines need to go through manual underwriting. 

Can I Get a Conventional Loan With No Credit Scores?
Conventional Loan With No Credit Scores

A conventional mortgage loan with no credit score. Yes, you read that correctly. You can qualify for a conventional mortgage loan without a credit score through Freddie Mac. In fact, multiple borrowers on the same application can qualify without a credit score. Meaning if you and your spouse both do not have a credit score, you can still qualify for a mortgage loan through Freddie Mac. There are a few caveats. You may not utilize a conventional mortgage loan to complete a cash-out refinance if you do not have a credit score. You may only use this loan program for a single-unit property that will be your primary residence.

Can I Get a Conventional Loan With No Credit Scores on Second Homes and Investment Properties?

No credit score lending is not allowed on second homes or investment properties. You must have a minimum of a 5% down payment (95% LTV max for refinance transactions). The mortgage must be a fixed rate interest, no adjustable-rate mortgages are allowed. Freddie Mac will not allow this loan program to be used to purchase a manufactured home.

These are pretty basic conventional qualifications. Because you do not have a credit score, your interest rate will be based on the lowest qualifying credit score for conventional lending, which is currently 620. Gustan Cho Associates offer highly competitive interest rates on our conventional mortgage programs. Reach out to our team for a quote from a licensed loan officer in your state!

What Are Tradelines For Mortgage?

Nontraditional credit is payment history that does not report to the credit bureaus such as the following:

  • Rental verification
  • Telephone bills
  • Utility bills
  • Cable bills
  • Cellular phone bills
  • Insurance monthly payments
  • School Tuition

How Many Tradelines Do You Need For a Mortgage?

Most mortgage lenders have lender overlays on credit tradelines. HUD, the parent of the Federal Housing Administration (FHA), does not have any credit tradeline requirements. However, lenders can have mortgage guidelines that are above and beyond those of FHA called FHA Lender Overlays. Most lenders have internal mortgage underwriting overlays where they require only traditional credit tradelines.

What Is Considered a Credit Tradeline?

Gustan Cho Associates will accept nontraditional credit for those with no credit and no credit scores. In order to be able to use nontraditional credit in lieu of traditional credit, the mortgage loan borrower needs a one-year payment history on non[traditional credit tradelines. Non-Traditional creditors need to be paid on time for the past 12 months. It needs to be proven with canceled checks or automatic payment deductions from the checking account going into the nontraditional creditor.

What Are The Different Types of Credit Tradelines Needed To Qualify For A Mortgage?

Borrowers without credit scores can qualify for a mortgage with non-traditional credit tradelines. Examples of non-traditional creditors are the following:

  • Landlord
  • Utility company
  • Telephone company
  • Insurance company
  • School

Cash payment is not acceptable on non-traditional credit.

Does FHA Look At Income Verification On FHA Loans With No Credit Scores?

Verification Of Rent is the best compensating factor and is required for FHA Loans With No Credit Scores. Rental verification is the strongest form of nontraditional credit and has a lot of weight. When consumers are paying the monthly rental payment, always pay it with a bank check. The only way that verification of rent is valid is if the renter can provide proof of payment via 12 months’ canceled checks and/or bank statements.

Borrowers Renting From Registered Property Management Company

If the renter is renting from a registered property management company, the 12 months canceled checks and/or bank statements can be replaced with a Verification Of Rent form completed and signed by the property manager. The VOR needs to be completed and signed, dated, and signed by the property management manager. The mortgage underwriter will require that borrowers provide twelve months of canceled checks to prove that they have been timely with making nontraditional credit payments.

How Many Credit Tradelines Are Required on Manual Underwriting?

Normally, 3 nontraditional credit accounts are required for those mortgage loan borrowers with no credit and credit scores because of having no traditional credit. Home Buyers that need to qualify for FHA Loans With No Credit Scores or Traditional Credit Tradelines with a mortgage lender licensed in multiple states with no overlays on government and/or conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

Can I Qualify For a Mortgage With Bad Credit?
Qualify For a Mortgage With Bad Credit

What if you do have a credit score, but your credit is less than perfect? There is a good chance our team can continue the preapproval process if your credit score is less than perfect. Since we do not have any additional lender overlay surrounding credit scores, we are able to help more families in most banks and lending institutions. We have the ability to offer FHA and VA mortgage loans with a credit score as low as 500! Our platform will underwrite based on agency guidelines and nothing further.

How Can I Apply For a Mortgage With Poor Credit?

Applying for a mortgage with our team has never been easier. Gustan Cho Associates’ easy application process has been simplified. Our loan officers are licensed in almost every state in the nation. So, after your initial consultation with Mike Gracz, you will be paired with a licensed loan officer in your state. The process starts by you filling out an online application and going over your income, employment history, assets, and liabilities.

What Credit Score Do I Need To Qualify For a House?

Part of the application also gives our team permission to get a full tri-merged credit report. After we receive your credit report, our team will go over any issues we see reporting. We will also go over all items reported on your credit report, so you know exactly what is reported. While you may track your credit on a free service such as credit karma, we utilize your full tri-merged mortgage scores (the 2,4,5 scoring models). This will give us insight into all items that are currently being reported. If there are any accounts we must address, we will send you a screenshot and give you instructions on how to proceed.

How Much Income Do I Need To Qualify For a Mortgage?

Assuming everything checks out on your credit report, your loan officer will reverse engineer the numbers based on your income and assets to send you a pre-approval letter. You will then have a detailed conversation with your loan officer about the next steps in the process. This is a great time for us to introduce ourselves to your real estate agent. This is an exciting time, and the home shopping process begins!! For any mortgage questions please contact Mike Gracz on 630-659-7644 or via email at [email protected] Our team of experienced loan officers is ready to assist you with all your mortgage needs. We look forward to answering any questions you have surrounding mortgage credit scores.

This blog on FHA loans with no credit scores was updated on August 6th, 2022