Credit scores are a big part of the mortgage approval process. Unfortunately, not everyone has a credit score. If you’ve never owned a credit card, never had a loan or haven’t used credit in several years, you’re probably one of those people. If you don’t have a credit score, does that take you out of the running to purchase a home?

Not necessarily! If you don’t have a credit score, it doesn’t mean that you can’t handle the financial responsibilities that come along with homeownership. At MortgageDepot, borrowers without a credit score can still be eligible for a home loan.

If you lack a credit score, this post is for you! Today we’re going to discuss your path to homeownership, even if you don’t have this critical piece of the puzzle.

Eligibility Criteria for Borrowers Without a Credit Score

If you don’t have a credit score, you can still be a co-borrower on a mortgage. The other borrower must have an appropriate credit score to qualify for the specified loan. Here are the rest of the eligibility requirements that you need to know:

  • This exception only applies to primary single-family home purchases. Second-home purchases or investment properties are not eligible.
  • Only purchase or rate/term refinance transactions qualify. Cash-out refinances are not eligible.
  • Loan amounts must fall within the conforming loan limits in your area. High-balance loans are not eligible.
  • The property must function as the primary residence for both borrowers.
  • The borrower with the credit score must contribute more than 50% of the income used to qualify for the mortgage.
  • The maximum loan-to-value ratio (LTV) allowed is 90%.
  • The maximum debt-to-income ratio (DTI) allowed is 39.99%
  • At least one borrower must complete an approved homeownership course before closing.
  • DU, Fannie Mae’s automated underwriting system, is used to determine the reserves required to qualify for the loan.
  • Nontraditional credit sources are required to strengthen the borrower’s credit profile.
  • Borrowers with derogatory credit are not eligible for this program. Derogatory credit includes serious delinquency or late payments on the borrower’s credit accounts.

Nontraditional Credit Sources Explained

As we mentioned, borrowers without a credit score need to show multiple nontraditional credit sources to qualify for a mortgage. They must provide at least two of these nontraditional sources, due monthly for the most recent 12 months. In other words, some of your most recent monthly bills might “fit the bill” (no pun intended). Here are a few examples of nontraditional credit sources that we will accept from borrowers without a credit score:

  • Rental history
  • Utility payments
  • Cell phone bills
  • Internet bills
  • Medical bills
  • Life insurance payments
  • Furniture rentals
  • Car insurance payments
  • 401K payments deducted from payroll
  • Child support payments

Contact Us Today!

We understand that our clients come from diverse financial situations. If credit hasn’t been a significant part of your life in the past, it doesn’t mean that you should cast your homeownership dreams aside! If you have real estate goals on your bucket list but don’t have a credit score, contact us today. We’ll help you find a mortgage solution that makes sense!

Connect with one of our loan consultants to learn more.

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