Colorado Springs Mortgage Insight – Help for Buyers With No Credit Score
Forward: the Colorado Springs Mortgage Insight is a monthly series of mortgage articles written by local mortgage experts exclusively for our readers, here on Colorado Springs Real Estate Connection.
Colorado Springs Mortgage Insight Help For Buyers With No Credit Score
By: Marcy Langlois – Mortgage Loan Consultant/ Vice President – Colorado Capital Bank
About a week and a half ago I received a phone call from a Realtor® wondering if I would be able to help out some of her clients. This is a scenario that I hear over and over…
These folks are first time homebuyers and have been shopping around for a mortgage. They were kind of discouraged because they had been told several times that they wouldn’t qualify for a mortgage. Not because they had BAD credit, but because they didn’t have ANY credit. This is a common misconception in the mortgage industry. Many people (including many mortgage lenders) believe that if you dont have an actual credit score then there is not any financing available.
Quite the opposite is true.
The fact is, there are many first time homebuyers that do not have credit scores or the little credit that they DO have is not very good. Fortunately there ARE mortgage options for home buyers in this situation. FHA is a government loan program designed to help all different sorts of people in different situations GET a loan for a home. See, FHA is more lenient in some areas of lending.
For example, FHA is willing to accept, in lieu of credit scores, four sources of alternative credit. Alternative credit is defined as 12 months of payments to one entity never being more than 30 days late, and FHA requires that the entity provide a written credit reference. Now, I have recently seen that many large companies are getting away from providing the letters for their customers. There is still hope, though. If this is the case, then you can provide 12 months of bank statements to verify the timeliness of payments, and FHA will accept this as good.
Now, back to the original customer… Not only was I able to get them approved with an FHA loan, but we also were able to register them with El Paso County Bond which provides 4% FREE MONEY to first time home buyers! They are closing in mid November and they are absolutely ecstatic.
So, if “lack of credit” is the only thing keeping you from buying your first home, then an FHA loan may be your answer.