No Credit Check Mortgages

No Credit Check Mortgages
Qualifying for a mortgage includes having your credit checked. Your credit score is a major factor in qualifying for a mortgage. It also determines the interest rate and other loan terms you are eligible for.
But some people don't have an established credit history. Some people may have poor credit. And some people may have insufficient verifiable income necessary to qualify for a conventional mortgage.
If you find yourself in one of these situations do not despair. A no credit check mortgage can to help you.
A no credit check mortgage does not rely on checking your credit scores from the major credit bureaus to help qualify you for a mortgage and determine the interest rate you pay. Instead, the lender takes into consideration other aspects of your financial situation such as your income, savings, personal references, and account payment histories.
You will still need to verify that you have sufficient income to repay the loan and have an established payment history that shows you are likely to make your payments on time. The lender will look at your pay stubs, tax returns and other forms of income verification that you supply them.
For your payment history, instead of looking at your credit score they may ask to review the payments you have made on accounts such as rent to a landlord, household utility bills, cell phone bills and other accounts where you have made payments on a regular basis. Ideally the accounts will have been opened for at least twelve months.
Although most people will have a well documented credit history, there are situations where some individuals may either not have established credit, have poor credit, or their income and credit are tied to a business or self employment rather than established as an individual. Other situations include someone who derives a large portion of their income from investments, is self employed or has irregular sources of income, or people who have paid mostly with cash in the past and have avoided using credit cards and loans. Finally, those with poor credit scores may wish to avoid having their credit score be used for determining the types of mortgages they are eligible for.
No credit check mortgages do provide the means for some individuals to qualify for a mortgage who would not otherwise be able to do so. However, there are some disadvantages to these types of mortgages.
One disadvantage is the interest rates you will be eligible for. Because the lender does not check your credit score, this puts them at a higher risk. The higher risk taken by the lender translates into a higher interest rate for the borrower. Interest rates on a no credit check mortgage will often be about three to five interest points higher than what an average home loan rate would be.
Another drawback is that these mortgages are often adjustable rate mortgages. The interest rate regularly resets according to what the prevailing interest rates are in the financial markets. In times of low interest rates this can be an advantage. However, when interest rates are high the monthly mortgage payment will go up. In general an adjustable rate mortgage adds an element of financial uncertainty that can make it harder to budget for paying your mortgage payments.
Because interest rates tend to be high with no credit check mortgages, monthly payments also tend to be high. For individuals with poor credit this can exacerbate an already difficult financial situation.
This type of mortgage will also usually require a larger down payment than a conventional mortgage. A lender could ask for as much as 25-40% as a down payment instead of the usual 10-20%.
For those individuals with insufficient credit history Freddie Mac and Fannie Mae, the underwriters of the majority of U.S. mortgages, offer some specific alternative credit qualification regulations. These loans are targeted towards individuals with insufficient credit history. They are not for people with poor credit. These loans offered through the FHA come with an interest rate of approximately 5% and a 30 year mortgage term.
In order to qualify for an alternative credit qualification you need to have either three active credit accounts that have been opened for a minimum of one year or have four non credit payment references. These include rent payments to landlords, household utility bills, a cell phone bill, or other accounts you have held for a minimum of 12 months. This helps individuals who do not have a conventional credit history qualify for a low interest, fixed rate mortgage.
If you are in the market for a mortgage but need to do so without a credit check, it is still possible to get qualified for a loan. If you have an insufficient credit history as opposed to poor credit, the first thing you should investigate is the alternative credit qualification mortgages. Because Freddie Mac and Fannie Mae underwrite most mortgages, these can be obtained through many banks. They may not be widely advertised because they require more work on the lenders part, but they are available. You just need to ask.
Other places to look for a no credit check mortgage include banks, savings and loans, credit unions and mortgage brokers. A good mortgage broker may have access to several funding sources, so this may be a good option to pursue.
The most important thing you must do is be sure to compare several mortgages to make sure you get the best interest rate and loan terms. You also will need to be prepared to prove to the lender that you are a good risk and that you have the means to repay the loan in order to get qualified and receive the best terms. Be prepared to provide documentation regarding your income, credit, and payment accounts in order to qualify for the best no credit check mortgage.