For many homebuyers, establishing credit came naturally once
they began working, applied for a credit card, took out a car loan or paid back
student loans. But what about potential homebuyers who don't have a credit
score, either because they are averse to credit cards or have yet to build up a
substantive credit history? Can they still apply for a mortgage?
The answer is yes, but "it's exceedingly difficult to
obtain a mortgage without a credit score," says Tim Ross, president and
CEO of Ross Mortgage Corp. in Royal Oak, Mich. "Lenders use automated
underwriting systems that base a loan decision on certain criteria, including a
credit score. But there are some nontraditional sources that can be used for
credit verification."
Mortgage lenders typically require a credit score of at least
620 or 640 to even consider an applicant for a loan. Whether you prefer not to
use credit cards, are new to this country or are simply a younger borrower who
hasn't built up enough credit history, there are some alternative sources that
mortgage lenders can use to determine your credit risk.
While most lenders require three or more sources of credit, Clint
Madison, a senior mortgage banker with Envoy Mortgage in Walnut Creek, Calif.,
says, "I've worked with borrowers who have a slim credit file and been
able to get them approved for a loan. The first thing we look for would be 12
to 24 months of canceled checks or verification from a landlord of on-time rent
payments."
Alternative sources of credit
Here are several other items that can be used for nontraditional credit
verification, Ross says:
·
Utility bills for gas, electricity or water, as long as they are
paid separately from your monthly rent.
·
Phone and cable bills.
·
Car insurance, renters insurance, life insurance or medical
insurance payments, if they are not paid by payroll deduction.
·
Child care or school tuition payments.
The more evidence you can provide that indicates a history of
on-time payments, the greater your chances of qualifying.
Source MSN
Diana Walton
Licensed Real Estate Consultant
Certified Negotiation Expert (CNE)
Keller Williams Realty
