Before you shame the mortgage industry please read on. While reminiscent of the “anything goes” mortgage era, “No Credit Score Needed Mortgage” is not a free pass to those with a pulse.
First of all, a home loan option for those without credit scores exists. However, no credit score requirement is not the same as no qualification requirements. In fact, no credit score required does not even mean that credit history review is wavied (see below for more).
The no credit score requirement home loan simply means…no credit score is required. After-all, regulations such as Dodd Frank and TRID require prudent and responsible underwriting by all mortgage lenders.
Lenders would seal their fate offering reckless products like the “No Income No Asset” loans of the early to mid 2000’s. Instead, the No Credit Score home loan allows consumers that have no credit scores to finance a new home. The difference is that this product allows mortgage lenders to responsibly qualifying the borrower for a home loan they can afford and pay back.
No Credit Score Home Loan Basics
There is a saying, “no credit is better than bad credit.” While this is true, why would someone not have a credit score? Several reasons cause consumer’s to be Credit score-less. For example:
- Choose to live a debt free life
- Being fresh out of college
- Choose to stop using credit after a bankruptcy
Documenting creditworthiness when you have no credit scores is simpler than you think. All that no credit score borrowers must do is verify 12 months of timely payments on 2 debts. 2 debts that do not report to their credit report. For example:
- Car insurance
- Cell phone bill
- Gym membership
- and many more
Proof of timely payments on 2 debts over 12 months is key for someone without a credit score applying for a new home loan. After-all, these 2 debts fill the void created due to the borrower having no traditional credit. Mortgage Lenders consider this alternative credit.f
All Other Mortgage Rules Apply
The No Credit Score Required feature is a detour around the missing credit score pothole. However, borrowers without a credit score are subject to standard employment, income, debt to income and asset requirements.
By Jeremy House