When it comes to financing a home, various factors will come into play. Things like your income, how much you have saved up for a down payment, and your debt-to-income ratio will all impact your ability to obtain financing. Another thing that lenders take into consideration is your credit. While most know that having a low credit score can make homeownership difficult, many are not aware that having no credit can also lead to hurdles during the home buying process. Here are three tips for buying a home with no credit.
Use A Government-Backed Loan
For those looking to buy homes but have no credit, a government-backed loan may be ideal. Lenders who offer loans backed by the government are more likely to work with borrowers who do not have credit. You can find no-credit financing with FHA, USDA, and VA loans. If you want to be a homeowner but have no credit, you should look into these government-backed options to see if you qualify.
Don't Count Out Conventional Loans
If you don't have any credit history, you don't necessarily have to count out a conventional loan. If you feel that a government-backed loan is not right for your needs, you may still qualify for a conventional loan. Many banks and credit unions will work with those who have a non-traditional credit history. No-credit financing may be available, but you'll need to search for it. The best way to find this kind of financing through a conventional loan is by reaching out to multiple lenders. You may be surprised by how many are willing to work with you.
Work On Building Your Credit
While no credit financing is available, there's no guarantee that you will be able to obtain it. If you plan to purchase a home, the sooner you start building your credit, the better. Some ways to build credit include getting a secured credit card or asking to be an authorized user on someone else's credit card. You can also request to have your rent and utility payments taken into account when building credit. Building up a good credit score will take time, but you will start to see some credit within at least six months.
If you have no credit but plan to buy a home, there are a few things that you can do to obtain financing. Government-backed loans are an excellent option for those who do not have credit. You also don't want to count out conventional loans. Some lenders are willing to work with you and provide no-credit financing. Finally, work on building your credit in the meantime if you cannot find financing.