Challenges Of Getting A Home Loan With No Credit
Posted on: 27 October 2020
Most people know that bad credit is a hindering block when applying for a home loan, but what about people with no credit? Are you a person who has no credit? If so, would you like to buy a house with a mortgage loan? People with no credit face various challenges when trying to get a home loan. However, it is not impossible to get one if you have no credit. Here are some of the challenges you might face if you are in this position and some tips to help you qualify for a home loan with no credit.
Why Credit Matters to Lenders
When you have credit, a lender can review your score to determine if you are a good candidate for a loan. A high score indicates a history of managing your money well, while a poor score tells a lender that you have experienced issues managing your money. If you have a high credit score, lenders are usually willing to approve home loans. When you have a low score, lenders can be leery of approving loans. Therefore, if you have no credit history, a lender has nothing to base their decision on when you apply for a loan. They will not know how well you manage your money. As a result, when they receive applications for home loans from people with no credit, they are not always sure what to do.
No Credit Is Better than Bad Credit
You should realize, though, that having no credit is typically better than having bad credit. If you have no credit, it likely means that you have never borrowed money. If you have never borrowed money, you could not mismanage your money. Therefore, no credit might be more favorable to lenders than bad credit.
There Are Options
Finally, if you have no credit and want a home loan, you might want to talk to a mortgage broker. A broker has more options than a bank, and a broker might be able to help you find a lender that will approve your loan. Some lenders will approve loans based on other factors. For example, if you have a positive rental history, you could get a letter from your landlord showing that you always pay on time. If you have ever had utility bills in your name, you could print a statement showing you always paid the bills on time. Some lenders will use these types of records to approve a loan for a person with no credit. You can talk to a home loan broker to learn more.
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