FHA Loans With No Credit Tradelines | Non-Traditional Credit

In this blog, we will cover and discuss getting a mortgage approval on FHA loans with no credit tradelines using non-traditional credit tradelines. HUD, the parent of FHA, sets the minimum credit requirements on FHA loans. FHA home mortgages are one of the most popular loan programs in the nation due to the low down payment requirements. HUD understands many borrowers who recently graduated from college or folks who had a bankruptcy may not have tradelines. That is why HUD allows borrowers to be eligible for FHA loans with no credit tradelines. In the following paragraphs, we will detail how mortgage borrowers can qualify for FHA loans with no credit tradelines. 

FHA Loans With No Credit Tradelines Using Non-Traditional Credit

FHA loans have the most lenient lending agency guidelines versus conventional loans. The minimum credit score required to qualify for a 3.5% home purchase FHA loan is 580  FICO. HUD allows borrowers with credit scores under 580 and down to 500 FICO to be eligible for FHA loans with an approve/eligible per automated underwriting system (AUS). Many borrowers get turned down by lenders on FHA loans because they do not have any credit tradelines seasoned for at least 12 months.

Does HUD Require Minimum Credit Tradelines on FHA Loans?

FHA loans with no credit tradelines are acceptable. There is nothing per HUD Agency Guidelines that states borrowers need seasoned credit tradelines to qualify for an FHA loan. However, lenders can have lender overlays. Lender overlays are higher lending requirements that are above and beyond the minimum HUD Agency Lending Guidelines. Most lenders will require a minimum of three credit tradelines that have been seasoned for at least 12 months as part of their lender overlays. Gustan Cho Associates has no lender overlays on government and conventional loans

How Do Lenders Approve Mortgage Loan Applications?

To qualify for FHA loans with no credit tradelines, lenders need to use non-traditional credit. Lenders use the past credit and payment history of borrowers to determine their payment habits and patterns. The chances are if the borrower religiously pays their monthly payments on time and has a long history of paying all of their bills on time, the borrower will continue to pay all of their bill on time going forward. This is why credit tradelines are important. A credit tradeline is a credit account the borrower has reporting on their credit report.

What Is Considered a Credit Tradeline?

What Is Considered a Credit Tradeline?

To be considered a credit tradeline, the borrower needs to have a history with the creditor for at least 12 months. Borrowers can qualify for a mortgage with no active credit tradelines. If the borrower has no credit scores because there are no credit tradelines that are current or in the past, lenders can use nontraditional credit tradelines to qualify for an FHA loan. Nontraditional credit tradelines are creditors that do not report the consumer payment history to the credit bureaus. Examples of nontraditional credit tradelines include utility bills, insurance bills, tuition, and other monthly bill payments that do not report to the three major credit bureaus

How Can I Qualify For an FHA Loans With No Credit Tradelines and No Credit Scores

Mortgage borrowers without active credit tradelines may not have a credit score. Borrowers without a credit score may qualify for an FHA loan with a manual underwrite. FHA and VA are the only two home mortgage programs that allow manual underwriting. Borrowers with no credit scores can use alternative nontraditional credit tradelines to qualify for a mortgage. The following nontraditional credit tradelines can be used for borrowers without a credit score.

Lenders Who Accept Borrowers on FHA Loans With No Credit Tradelines Will Use Non-Traditional Credit 

Verification of rent from your landlord documenting the on-time rent payments. Payment history for your utility companies (gas, electric, water, etc) and provide 12 months of canceled checks and/or 12 months of bank statements. Payment history for your cell phone or internet provider and 12 months canceled of checks and/or 12 months of bank statements showing on-time monthly payments. Payment history for your homeowner’s insurance and proof of on-time payments. Payment history for your property taxes and proof of on-time payments. Payment history for your automobile insurance and proof of on-time payment. Proof of on-time payments can be provided with canceled checks and/or bank statements.

Documents Required To Start The Mortgage Process The Approval Process For FHA Loans With No Credit Tradelines

Documents Required To Start The Mortgage Process The Approval Process For FHA Loans With No Credit Tradelines

The same documents are required to process an FHA loan with no credit scores. FHA loans with no credit tradelines means you will have low or no credit scores. The following documents are required to start the mortgage process:

  • Copy of the front and back of the borrower’s and co-borrowers social security card
  • Driver’s license or some other form of state ID
  • 30 days of pay stubs and W2s (for wage earners)
  • Two years of income tax returns (for wage earners and self-employed borrowers)
  • 60 days of Bank Statements
  • Account statements for any other liquid financial and/or securities accounts
  • Completed 1003 mortgage loan application
  • Form HUD-92900-A – this is an addendum to the 1003 loan application
  • Alternative Credit Documentation as outlined above
  • Sales contract for purchases
  • Copy of the deed for refinance

The Best FHA Lenders For FHA Loans With No Credit Tradelines Approval

The team at Gustan Cho Associates are experts in helping borrowers with no credit tradelines. Over 75% of our borrowers are folks who could not be helped by other lenders. We have zero lender overlays on FHA, VA, USDA, and conventional loans. Our team of mortgage experts can help borrowers with no credit tradelines, no credit scores, late payments, collections, charged off account, during Chapter 13 Bankruptcy, and other credit issues that other lenders cannot help. To qualify for an FHA loan with no credit tradelines and/or credit scores, 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 GCA Mortgage Group is available 7 days a week, on evenings, weekends, and holidays. Gustan Cho Associates has no lender overlays on FHA, VA, USDA, and Conventional Loans.

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