You might have seen a lot of advertisements offering home loans with bad credit. However is it possible to get the mortgage loan with no credit or zero credit? If you have just graduated from college, you would have no time to build your credit report and hence, it would be a difficult task for you to obtain mortgage or a loan. Irrespective of the reason for the lack of credit, you still have options in acquiring these loans.
You should understand the basic criteria used by mortgage lenders to assess the proposed borrower. The lenders examine the three basic aspects of the borrower namely the income, assets and the credit. Even though the lenders will go for a detailed examination, they should be satisfied with the basic aspects mentioned above.
When the borrower does not have the proper credit history to offer, they can prove their credit worthiness by furnishing the details such as their regular and stable income and other assets. For availing a mortgage loan with no credit history or to qualify for a home loan, the borrower should have good, steady employment with a fixed income. The alternate credit source might also include the previous history of monthly payments like utility bills, insurance, prompt credit card payments, home rental payment and loan dues. This information is used as a base to ascertain the financial ability of the borrower.
Once the lender is satisfied with the employment and other alternate qualifications, the borrower is allowed to utilize the alternate credit source for applying for a mortgage or a home loan.
The borrowers are offered two options. First option is trying to get a subprime loan or government sponsored loan through FHA – Federal Housing Authority Loan.
A Subprime loan is the primary home loan available in the market for those people with no credit or bad credit. These loans are offered at fixed and variable mortgage interest rates. The advantage is, you can get the loan approved in a shorter period. Additionally, the loan is facilitated with the option of refinancing after a couple of years on establishing good credit.
Other option is FHA loan route. These loans are developed to extend support towards the first time home buyers who struggle with no credit history as well as little money for down payment. FHA loans are offered on good terms and at affordable rate of interest. However, these loans are also offered on the basis of income of the borrower as well as according to the price of house. The advantage of FHA loan is that the interest rate remains stable until the completion of loan period and discount is offered to the prospective borrowers on prompt payments without any default.
Once you get approved for the home loan or mortgage loan with no credit, by making prompt payments, you can establish a good credit history.
So, when you have decided to apply for a home loan or mortgage loan with no credit history, collect the variety of options offered by various lenders and opt for the best one.