Credit references, credit reports, credit scores are all important when it comes to buying a home. However, they are not all equally important or required. If you know what you need to qualify for a mortgage buying a home can be much easier if you have the right credit criteria.
Essentially, the most flexible loan programs to get you into a home if you have little credit history are FHA home loans, VA loans, and USDA loans. Each of these programs allows for alternative credit histories and reasonably flexible credit criteria when it comes to approving a mortgage application to buy a home or refinance a mortgage.
If you are going to try to use Fannie Mae and Freddie Mac conventional financing you will need to have some established credit history on your credit report and have credit scores of at least 660 to qualify.
Alternative Forms of Credit To Get A Mortgage
If you know that you do not have much established credit on your credit report like a credit card, car payment, or student loan for example, you may be able to get approved for a mortgage if you can show satisfactory payments to utility companies for gas, electricity, water, in home telephone/cable TV service etc.
You will also need to be able to prove your rent payment to your landlord. If you are paying a management company it is possible to get them complete a verification of rent form that your mortgage company would send them on your behalf. If you are paying a private owner, you will need to provide cancelled checks that you wrote for your rent. If you are paying cash, you need to find a way to get a written legal record like a cancelled check to prove your payments. Cash receipts will typically not cut it.
In some cases you may be able to use the following account payments to demonstrate your credit worthiness to help you get approved for a mortgage:
Insurance policy payments
Child care payments – pre school payments
Retail store payments – department, appliance, rent to own, furniture etc.
Medical bill payments
Chapter 13 trustee payments (after 1 year of being in the program)
Cell phone and internet account payments
Regular payments into a savings account that shows a growing balance over time
Review of your bank statements to show no bounced checks or NSF checks
Payments made on an automobile lease that are not reported to the credit bureaus
Personal loan payments where there is a written agreement with terms and conditions for satisfaction.
All in all, you must remember that it is up to you to establish a sufficient credit history in order to buy a home. The mortgage company is looking to lend money to people who can demonstrate that they are able and willing to responsibly pay back the mortgage. If you want to see where you stand in qualifying for a mortgage please complete the form below: