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It may just take a little extra effort on your part.
Key points
- You’ll often hear that it takes strong credit to qualify for a home loan.
- Dave Ramsey insists that it’s possible to borrow for a home purchase even without a credit score.
- You’ll need to provide more information to the lender through a process called manual underwriting.
Most people can’t afford to purchase a home outright. That’s where mortgages come in.
Now, there are different factors that mortgage lenders tend to look at when evaluating home loan applicants, and a big one is your credit score. That number provides a snapshot of your trustworthiness as a borrower.
If you have a high credit score, it tells lenders the following:
- You’re good at paying your bills and obligations in a timely manner
- You don’t have an excessive amount of debt
- You haven’t recently applied for a lot of new credit
A poor credit score can ruin your chances of qualifying for a mortgage. But what if you don’t have a low credit score, but rather, no credit score at all?
It’s a scenario people find themselves in for different reasons. If you’re a young adult who’s yet to really have bills to cover on your own, you may not have enough of a credit history to have a credit score established. And if you’re someone who makes a point not to take on any debt at all, you may not have a credit record either.
But if you plan to purchase a home and need to finance it, don’t panic. Financial expert Dave Ramsey insists that you actually don’t need a credit score to qualify for a mortgage. You just need to find a lender who’s willing to work around that issue.
How to get a mortgage without a credit score
A credit score makes it easier for mortgage lenders to assess your ability to repay a home loan. But there are other steps lenders can take to get that information.
Ramsey says that if you apply for a mortgage without a credit score, you’ll have to go through a process called manual underwriting. That means having to provide additional documentation, like bank statements and pay stubs, so your lender can assess your ability to repay a loan.
In reality, though, this is information you’ll generally have to provide to your lender even if you have a credit score. Or, to put it another way, going through manual underwriting really isn’t such a big deal. Ramsey acknowledges that it may take a little longer than applying for a mortgage with a credit score, but it’s totally doable.
It’s not a deal-breaker
Not every lender offers manual underwriting, warns Ramsey. You may need to make some extra calls to find a lender that will give you a mortgage without a credit score. But if you’re willing to make that effort, you may find that you’re able to get the financing you need to purchase a home — even if you have no credit history to point to.
Now, if you have a poor credit score, that may be a deal-breaker. It takes a minimum credit score of 620 to qualify for a conventional mortgage, but many lenders will want to see a higher number than that. If your score needs work, it pays to do what you can to boost your credit score before applying for a mortgage so you don’t have to face rejections.
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