Credit And Non Traditional Credit Tradelines

Non Traditional Credit Tradelines

Gustan Cho Associates

If you are applying for a mortgage loan, the majority of the mortgage lenders will require credit tradelines that has been established for at least 12 months and that is in good standing.  Majority of the mortgage lenders require three established credit tradelines.   There are mortgage lenders that will require up to five credit tradelines.  Example of credit tradelines include credit cards, automobile loans, student loans, installment loans, and other types of revolving and installment loans.  There are mortgage lenders that will not accept your mortgage loan application if you do not have enough credit tradelines even though you might qualify with sufficient income and good credit.

Non-Traditional Credit Tradelines

For mortgage loan borrowers who do not have sufficient credit tradelines, non traditional credit tradelines can be used to satisfy the credit tradelines requirements.  Non traditional credit tradelines are credit tradelines such as rental payments, utility payments, and other means of credit payments that do not report to the credit reporting agencies.  Rental verification can only be used if the mortgage loan borrower has 12 months of cancelled checks or by supplying a letter by a licensed registered property management company if they have paid their monthly rental payment by cash.

Non Traditional Credit Tradelines In Lieu Of Borrowers With No Credit

Non Traditional Credit Tradelines requirements:

  • A minimum of 3 credit references each rated for 12 months payment history is required.
  • No housing lates.  Rental verification can only be used if and only if the borrower can provide 12 months cancelled checks with no late payments in the prior 12 months if the renter is renting from a private individual.  For those renting from a licensed property management company, a letter stating that the renter has made timely payments for the past 12 months is sufficient.
  • Maximum 1×30 day late payment with the other credit references in the previous 12 months
  • There can be no major adverse or public records filed in the last 12 months
  • All loans with non-traditional credit require a manual underwrite.
  • Max 90% LTV.
  • DTI Ratios 31%/43%.
  • Gift funds allowed for down payment and closing costs for FHA.
  • Gift funds not allowed for VA
  • 2 years tax returns and tax transcripts required and must follow standard FHA guidelines.

Add New Credit Through Secured Credit Cards

If you intend on purchasing a new home and do not have credit, I strongly recommend that you start establishing new credit as soon as possible.  The best and fastest way of establishing new credit is by getting secured credit cards.  Make sure you get secured credit cards that report to all three credit reporting agencies.  If you need secured credit card recommendations, you can apply online now at www.gustancho.com .  First Progress Secured Credit Cards and Blue Sky secured credit cards are excellent choices and will not only establish your credit but also boost your credit scores if you use them the right way.  I suggest that you get three secured credit cards with at least a $500 credit limit.  Make sure you do not have a credit balance greater than 30% of your credit limit in order to maximize your credit scores.  By following these tips, each secured credit card can boost your credit scores by at least 20 points or more.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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