Like it or not, your credit score has become a big part of how people like mortgage lenders see you. If you have no credit at all, that could make buying a house seem like an impossibility. But it's not -- many people have no credit, from college students just starting out to people so determined to avoid debt that they never got a credit card, and mortgage lenders may be willing to look at other factors when you apply. You just have to approach the situation a little differently.
The Bigger the Down Payment, the Better Your Chances
The main issue with not having credit is that lenders have no record to look at when determining whether you will make your mortgage payments. While you could get your landlord and utility companies to report your payments or act as reference contact points, those strategies take time. And if you're trying to buy in a hot housing market, that time could cost you a house because someone else could swoop in and buy the one you want.
You can set a lender's mind more at ease by having more of the house cost in cash up front. If a mortgage lender sees that you have a substantial chunk ready to go to the bank, and you're asking for very conservative mortgage terms (fixed interest and so on -- choices that will make your payments predictable and easier to handle), you may be able to convince a lender that you'd be a good risk.
Credit Union History
Another tactic you can try is talking to the bank, or preferably, the credit union at which you currently have an account. They will have your account history immediately available and will be able to see what your income and payment/spending records have been like. A credit union is preferable to a regular bank just because credit unions tend to have more personalized services meant to help customers, and they also tend to be more familiar with their customers. But if you only have accounts with regular banks, you can certainly talk to their mortgage departments about what they'd like to see in order to lend you money.
If the reason you don't have credit is because you've just moved to the United States from overseas, you may be able to make one account change that will give you a credit record -- if you have credit cards from banks in your home country that have U.S. equivalents (for example, a Visa card from your home country), contact the credit card company and see if you can get the account and card transferred to a U.S. bank. If the card is a major company like Visa or MasterCard, you may be able to move the account, rather than having to apply for a new one entirely, which can take longer.
There's Always the Gas Station
If you're still having issues, you can always get a quick gas station credit card. Use it for gas purchases only -- things that you would be able to pay quickly -- and build up a record of good payments. In fact, even if you can use some of the other strategies here to get a mortgage with no credit, you may want to get a gas station card anyway and start building your score. That can help you down the road if you ever want to apply for refinancing.
Buying a house with no credit is not impossible at all. With the help of a good real estate agent and a mortgage lender who understands that there are many legitimate reasons for not having credit, you could find yourself moving into your new home soon. For more information, contact a business such as SWE Homes.