Over 5 million homes were sold in 2015 alone, and many of those buyers had little to no credit. It is not surprising to most home buyers that you need a certain credit score in order to buy a home. Without credit, you could struggle to not only get a bank to provide you with a loan but also to get a low enough interest rate to make the payments fit into your budget. Lenders like to see a high credit score, as this normally signifies that the buyer is a low risk for the bank. If you do not have credit and still want to purchase a home, there are a few things you can do to increase your chances of approval from a lender.
If you are struggling to get a home loan without credit, then you may want to make your lender search more local. Local banks do not carry the same restrictions on mortgage loans as their much larger counterparts. Additionally, credit unions also have easier loan requirements that could help you achieve your goal of being a homeowner. Another option is to talk to your local bank. If you have been a customer for many years with them, they will be more apt to approve a loan for you in an effort to retain your business.
The lease-to-own option is a suitable option for those who have no or little credit. It is always best to make sure you have cash as a down payment to show the seller that you are serious about making consistent payments. With a lease-to-own option, part of your payment goes to rent, and the other part of your payment goes toward the equity in the home. This allows you to build credit and be a homeowner at the same time.
Start Building Credit
If you have been turned down by lenders for no credit, then your next option should be focusing on building credit. You can do this by applying for a credit card. After several months of putting charges on the card and paying it right off, you should start to see your credit grow. In a year's time, you should have adequate credit to go ahead and get a loan from a bank for a mortgage.
Save Your Down Payment
It is hard for a lender to turn down cold, hard cash. If you have a substantial amount of money to put down on a home, then the lender will be more likely to approve you for the loan. Experts suggest having at least 20% down for a mortgage to get qualified with no credit.