Qualifying For Home Loan With No Credit Tradelines
By Gustan Cho
Tips In Qualifying For Home Loan With No Credit Tradelines:
Credit tradelines are active and open credit accounts such as credit card accounts, automobile loans, installment loans, leases, and other creditors who report your credit payment history to the three major credit reporting agencies. When a mortgage lender requires a certain amount of credit tradelines, they are looking for active open credit accounts that has been seasoned for at least 12 months. A mortgage lender may ask for credit tradelines that have been seasoned for 24 months. If you opened a credit account such as a secured credit card, that new credit account will not count towards a credit tradeline until you had it for at least 12 months. To be able to count it as a credit tradeline, you must have a 12 month payment history.
Guidelines On Qualifying For Home Loan With No Credit Tradelines
Home buyers can qualify for home loan with no credit tradelines. Many mortgage lenders do not want to approve mortgage loan borrowers for home loan with no credit tradelines. There is no minimum amount of credit tradelines required to get an approve/eligible per DU FINDINGS or LP FINDINGS via the Automated Underwriting System but many mortgage lenders do have their own mortgage lender overlays in the minimum amount of credit tradelines. Unless you go with a mortgage lender that just go off the DU FINDINGS or LP FINDINGS, most mortgage lenders will normally require at least 3 credit tradelines that have been seasoned for at least one year. Some mortgage lenders will go as far as requiring three credit tradelines that has been seasoned 24 to 36 months. For those folks who have recently filed bankruptcy or had a foreclosure, deed in lieu of foreclosure, or short sale, I strongly recommend that you start re-establishing your credit as soon as possible by getting several secured credit cards so you can start developing your credit tradelines if you intend on buying a home in the near future.
If a bank, credit union, or mortgage banker tells you that you do not qualify because of not having enough credit tradelines, or no credit scores, do not give up hope. Every mortgage lender has their own set of mortgage lender overlays when it comes to credit tradeline requirements and just because you do not meet one mortgage lender’s tradeline requirement does not mean that you do not qualify with a different mortgage lender.
How Do I Go About Qualifying For Home Loan With No Active Credit Tradelines?
There are situations where a person has had previous credit and credit history but has closed out all of their accounts. By closing out their accounts, it means that they have paid off every installment loan they had and closed out all credit card accounts. These folks might have a good credit score and a good prior credit history but do not have any credit tradelines. Situations like these might become an issue but there is a positive solution. If a mortgage loan applicant has no active credit tradelines on their credit report, they might get a refer/eligible per DU FINDINGS and/or LP FINDINGS which means they did not get an automated approval via the Automated Underwriting System. Just because you do not get an automated approval via Fannie Mae’s or Freddie Mac’s Automated Underwriting System does not mean that you do not qualify for a residential mortgage loan. As long as you meet all other mortgage lending guidelines but cannot get an approve/eligible per DU or LP FINDINGS, your mortgage loan application may qualify for manual underwriting which mean that your mortgage loan has to be manually underwritten. Manual underwriting files do require compensating factors and the maximum debt to income ratio cap is capped at 43% versus 56.9% debt to income ratio. With manually underwritten loan applications, there is a minimum of 3 credit tradelines required. If the mortgage loan applicant does not have three active credit tradelines, non-traditional credit may be used in lieu of traditional credit tradelines.
What Are Non-Traditional Credit Tradelines?
Traditional credit tradelines are credit items that report to the three credit reporting agencies such as credit card payment history, auto loan history, student loan payment history, and installment loan payment history. Non-traditional credit tradelines are tradelines that do not report to the credit reporting agencies. Rental verification, utility bills, insurance payments, cell phone payments, cable tv payments are all examples of non-traditional credit tradelines. Your mortgage lender needs to do a verification of these non-traditional credit tradelines and will require that you provide 12 months canceled checks and do a credit supplement and have it reported to the three credit reporting agencies.