At Volunteer Home Mortgage, we love making the dream of homeownership a reality for our clients!
In fact, one of the most satisfying parts of our job is showing people they do not have to have good or perfect credit to buy a house.
No matter what some banks or friends have told you, having no credit history or low credit scores does NOT automatically disqualify you from every mortgage lender or loan product.
Securing a home loan IS still possible for many borrowers whose credit may prevent them from getting a traditional mortgage loan, and we want to show you our proof.
What is Credit?
When mortgage lenders are reviewing borrower loan applications, they are looking at borrowers’ credit. Typically, they prefer to loan money to borrowers with good to excellent credit.
That sounds simple enough, right? Mostly, but let’s break it down even more.
CREDIT is your ability to borrow money for products or services AND pay it back.
Lenders report the history of how well and promptly you repay your debts to national consumer reporting agencies – TransUnion, Experian, and Equifax specifically – which makes up your CREDIT REPORT.
Those agencies then assign you a 3-digit CREDIT SCORE between 300 (lowest) to 850 (highest) to indicate how trustworthy you are as a borrower.
Mortgage lenders base your CREDITWORTHINESS on the combination of the historical information in your credit report and the score, or grade, you are given by the credit bureaus.
Do You Need Good Credit to Buy a House?
Typically, mortgage lenders like borrowers to have good to excellent credit scores and lengthy, positive credit histories. However, not everyone meets those standards.
Many first time home buyers we work with have NO recorded credit history. If young people (or people who prefer to pay for everything in cash) have not borrowed money for car loans, student loans, credit cards, or the like, they will not have anything recorded on their credit reports.
Other home buyers we work with have less than perfect credit. Some have been overwhelmed by medical debts insurance did not cover. Others have sent in late payments on a couple of loans. Their credit reports show history, but that history may have positives and negatives on it.
We are here to offer you hope, though. You CAN still buy a house with no credit or less than perfect credit. We may have to look beyond traditional mortgage loans to government-backed loans or manually-underwritten loans, but there are possibilities!
Cases in Point
As mortgage brokers, our primary goal is to help borrowers and lenders complete real estate transactions. We do not loan people money for a house; that is a bank’s job. However, we do work hard to match homeowners with the “right” mortgage lenders and loan products.
Because we are not limited to one or two banks or lenders, we can help borrowers who have less than perfect credit find lenders and loan products that work for them. Here are just a couple of examples of what we have been able to do for borrowers:
- Case Study #1 – We just had borrowers that completed a Chapter 13 Bankruptcy in June of 2021. They had NO credit scores and no active credit history, and they were renting the house they wanted to purchase.
To their amazement, we were able to get them a VA loan that was funded successfully and required no money out of their pockets at the closing table for their dream home in Maryville, Tennessee.
- Case Study #2 – We started working with another set of borrowers in 2018 who had poor credit histories and credit scores in the low 500’s.
With our guidance, they have worked diligently to save money for a down payment, to pay off derogatory debts, to pay current debts on time, and to lower debt-to-income ratios.
Their efforts over the past few years raised their credit scores above 700, and they recently purchased a beautiful manufactured home in Clinton, Tennessee with an FHA loan we secured for them.
Whatever your credit situation is, call us before you assume you cannot buy your dream home. We work with lenders who offer non-traditional mortgage loans, and we are willing to work with you and for you to buy the house of your dreams.