This Article Is About Freddie Mac No Credit Score Mortgage Guidelines

Fannie Mae and Freddie Mac No Credit Score Mortgage set conventional mortgage guidelines.

• There are times where borrowers need to go with conventional versus FHA Loans
• A prime example is with Income-Based Repayment
• Conventional Loans allow IBR. HUD, the parent of FHA, does not allow IBR payments on outstanding student loans
• HUD requires 1.0% of outstanding student loan payments to be used as borrowers hypothetical debt
• This holds true even though student loans are in deferment and/or is on an Income-Based Repayment Plan
• High balance outstanding student loans are a major hurdle when it comes to qualifying for home loans
• This holds especially true for young doctors, dentists, lawyers, and educators
• Another case where borrowers need to go with conventional versus FHA Loans is when they have a prior mortgage included in bankruptcy
• The 4-year waiting period starts from the discharged date of the bankruptcy and not the recorded date of the housing event
• Whereas with FHA, the 3-year waiting period does not start until the recorded date of the housing event
• In cases like this, borrowers may need to go with conventional versus FHA Home Loans

How No Credit Score Mortgage Work

Freddie Mac No Credit Score Mortgage On Conventional Loans:

Freddie Mac has once again updated its guidelines in an effort to offer financing to more Americans.

• This is a useful update for borrowers struggling to establish credit scores
• Freddie Mac will now offer financing to clients who do not have reporting credit scores
• Our team at Gustan Cho Associates are seeing more and more clients who do not have a credit score
• This can happen to anybody, especially first time home buyers
• Whether you have not established credit yet in your young life or have paid for your expenses with cash in your later years, not everyone has a credit score
• HUD, the parent of FHA, has offered mortgages to borrowers without credit scores for a long time
• Borrowers with credit score for one reason or another, FHA will base the loan off a 580 credit score
• As of May 14th, 2017 Freddie Mac will now offer mortgages to borrowers without credit scores

The blog will cover the qualifications and how to get started.

Minimum Credit Score On Conventional Loans

Mortgage Borrowers without a qualifying credit score may still purchase or refinance a home with Freddie Mac.

This loan program is available for all primary residences.

Here are a few more basic requirements:

• Must be a one-unit property, condos are allowed (manufactured homes are not allowed)
• Must have a down payment of at least 5% (95% LTV) or have at least 5% of the equity in the property to complete a no cash-out” refinance (CASH-OUT REFINANCES NOT ALLOWED)
• The mortgage must have a fixed interest rate
• No non-occupying co-borrowers allowed
• Loan amounts must be within county limits

Freddie Mac Guidelines On Tradelines

Now we will dig into how the product works and more specific qualifications.

• Borrowers without credit score reporting must establish non-traditional credit tradelines
• Non-traditional credit tradelines can be used in lieu of traditional tradelines
• Must have at least two payment references within the United States to establish a “tradeline”
• An example of this could be a cell phone bill or a utility bill in your name
• Must prove at least 12 payments have been made by providing bank statements showing the payments

At least one borrower on a mortgage application must establish a housing payment history “tradeline”, such as paying rent.

Importance Of Timely Payments In Past 12 Months On Debts

At least the past 12 payments must be verified for on-time payments:

• Delinquency of a housing payment may disqualify you from obtaining this mortgage product

For purposes of this blog;

• delinquency of a housing payment is later than 30 days more than once in the past 12 months
• Meaning borrowers are allowed ONE 30 day late payment on housing payment within the past 12 months
• More than one 30-day late or one 60-day or greater late payment will disqualify borrowers from an approval
• All other non-traditional credit tradelines may not have any 30-day or greater delinquencies within the past 12 months
• Proper documentation must be provided for all on-time payments
• They must be dated within an acceptable time frame from the date of closing

Contact us for more details on documentation.

Freddie Mac Guidelines On Collections And Bad Credit

Potential borrowers without a credit score may not have any collection accounts, judgments, or tax liens filed within the past two years. Medical collections are excluded from this 24-month time frame.

When utilizing non-traditional credit at least one of the borrowers must obtain a homeownership counseling education certificate.

• Most of the time these courses have a small cost associated with them
• These are a great tool to understand what to expect owning a home

Over the past few years, Fannie Mae and Freddie Mac have become more aggressive trying to enter into the lower down payment mortgage products.

• They are trying to be more competitive with FHA loans
• There are advantages to both mortgages
• Please reach out to the experts today to go over your pre-approval qualifications

Home Buyers struggling to find a mortgage company who can get them approved without a credit score please reach out to Mike Gracz on (800) 900-8569 or text for a faster response. Or email us at gcho@gustancho.com.  at Gustan Cho Associates, we do not have any lender overlays and we are able to underwrite directly to Freddie Mac guidelines.