The first-time home buyers had no mortgage and could own their car outright and can reach for the debit cards over credit cards once given the opportunity. Such traits put the first-time home buyers off the grid of credit as well as could make getting approved for mortgage a little of a challenge. Consider this as an unintended consequence of living debt-free without visible evidence that you have managed credit accounts, the mortgage lenders be nervous about your ability in repaying on a loan, there will be no history for them. Fortunately, you do not really need to have that traditional credit profile just for you to get approved for mortgage.
FHA mortgage is always available for everyone who has no credit and FHA-backed mortgages are made available from almost all mortgage lender.
What to Know about Credit Report?
Credit report is basically a written account of every creditor account that belongs or has belonged to an individual in their lifetime. The credit reports are the compilation of information from the credit bureaus, which are the companies to which the creditors report the borrower payment history regularly. In every mortgage space, there are primary credit bureaus and each of these uses available information to assess one’s credit score.
The credit score is what represents you of the likelihood that you will stop paying for your mortgage. If your credit score is high, it only means that you can make payments easily. The algorithm that uses your credit report to know your credit score is actually cloaked. You do not know how every line item affects your final score. Nevertheless, you know that your payment history is the biggest factor to determine your credit score.
This is the reason why first time home buyers have credit scores rarely that are excellent. There isn’t enough history of managing the credit and making the payments to make that type of determination. It is okay to have something that’s not perfect. In fact, it’s also okay if you have no credit because you will get your mortgage approved.
FHA Mortgages Are Suited for Everyone with No Credit
What makes FHA mortgages amazing is that these do not require traditional credit. It’s the faster and better solution to look for mortgage loans that are meant for borrowers with no credit to their name. Rather than turning away the borrowers who haven’t had an opportunity to build credit history, FHA mortgage guidelines basically instruct the lenders to look at every aspect of a mortgage application. It’s ideal for first-time home buyers for the reason that these mortgages allow low down payment of 3.5 percent that will help a household with good income yet not enough saving move from renting to homeownership.
Posted by Randy Blakeslee