Understand: How To Get a No-Credit Home Loan?

Feb 17, 2024 By Susan Kelly


You have no credit history because you've never had a credit card in your name. You've never needed to apply for a credit card before, but you're about to make the biggest purchase of your life, and you know you'll need one. Is it possible to get a home loan if you have never had credit before? It's conditional. Though it may sometimes feel that way, you are not alone in how you choose to conduct your life. Around 13.6 percent, or around 45 million people, in the United States do not have a credit report on file with any of the three major credit agencies, according to a report published by the Consumer Financial Protection Bureau. What follows is a rundown of the operation and the choices you'll have during it.

What Lenders Are Looking For

Lenders frequently use credit scores as a first step in determining what kind of borrower you might be. Each of the three credit bureaus uses a different method to arrive at your credit score based on the data in your report. Each organization's version of this formula may vary significantly. But without a credit history, you won't have a credit score. This formula could still be useful if you're interested in applying for a no-credit-check mortgage. Looking at this data can give you a sense of the standards set by mortgage lenders.

How To Get A Home With No Credit Score

You may take certain steps to increase your chances of being approved for a mortgage if you want to buy a home but have no credit history. Some possible first steps are discussed below.

Get A Cosigner

To improve your chances of getting a home loan if you have a low or nonexistent credit score, you can include a creditworthy cosigner on your application. You, as the borrower, are the one who is ultimately liable for making monthly loan payments. Still, some lenders insist on having a cosigner who is also ready to take on some responsibility for ensuring the loan is repaid on time. A cosigner can be someone who agrees to be named on the mortgage with you. This could be a spouse, parent, brother, or close friend. You must realize that your loan's origination and repayment will be reflected in their credit reports.

Have A Large Down Payment

Lenders will be more willing to provide mortgage financing for a house purchase if a higher down payment is made. Suppose you have previously put down a sizable amount or developed substantial equity in the home. In that case, the lender has a better chance of recovering their investment in the event of a default on your loan repayment. That is to say, the lender's chances of getting their money back are increased. A substantial down payment may help increase your chances of being approved for a mortgage if you have a credit history, making it harder for you to qualify for a new property. Greater down payment may also be necessary from some lenders and home loan products if your credit score is low.

Go Through A Manual Underwriting Process

The underwriting process begins with the lender evaluating the risk associated with the new loan based on information provided by the borrower. To assess if a borrower can afford to make their loan payments on time without causing financial hardship, it is necessary to look at their income, employment, current debt load, and other regular bills and expenses.

Use Credit Unions Or Online Lenders

Your chances of being approved for a house loan via a credit union or a local bank may improve if you already have a relationship with the business. Credit unions typically have more lenient lending requirements and a more individualized approach. Positive payment history on other products offered by the same financial institution (vehicle loan, credit card) can increase the likelihood of approval for a mortgage loan. If you're looking for a loan, you may have more luck applying with online lenders, such as through an aggregator site, than with more conventional loan providers. This gives you access to a large pool of financial options to choose the most suitable lender for your needs.

Loan Programs That Allow For Mortgage Approval With No Credit Score

Besides the options above, other mortgage loan programs are tailored to individuals with low or nonexistent credit scores. Some of these programs have official backing, and as a result, the government will insure the loan on behalf of the lender, making it easier for the lender to approve borrowers with higher risk profiles.


There may be options available to you even if you have no credit history and are looking for a mortgage loan. However, a lender may insist on pulling your credit nonetheless. To qualify for a mortgage, you may need to wait until you have established your credit history. This means you qualify for a normal credit card, provided you keep your balance below 30% of your available credit and pay your bill on time each month. You might be able to apply for a mortgage and get a FICO score after six months of responsible credit use.

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