• Buying a house with no credit may be more challenging, but manual underwriting and co-signers may make it possible for some buyers. 
  • If you don’t have established credit, you may strengthen your mortgage application by increasing your down payment, providing evidence of on-time bill payments, providing proof of assets, and maintaining a lower debt-to-income (DTI) ratio. 
  • You may be able to establish credit quickly by asking for your rent or utility payments to be reported to the credit bureaus, being added as an authorized user to someone else’s credit card, or getting your own credit card and using it regularly. 

Your credit score is an important consideration when buying a home because mortgage lenders typically look at your score to see how you have managed debt and determine the level of risk they are assuming in lending you money for your home purchase. The perceived risk level may influence whether or not you’re approved for a home loan, as well as the mortgage interest rate and terms the lender may offer.[1]

But what happens if you don’t have credit? Maybe you’ve never used debt or credit to finance a purchase. Or maybe you’re new to the United States and haven’t established an American credit record yet. Can you buy a house with no credit?

Can You Buy a House with No Credit?

It may be possible to buy a house with no credit. However, you may need to consider less traditional strategies for securing a mortgage loan if you don’t have any credit. 

In traditional mortgage lending, a minimum credit score of around 620 is common, although requirements vary by loan type and lender. To buy a home without credit, you need to find a lender who offers specialty loan products that don’t carry the same credit score requirements. 

No Credit vs. Bad Credit

Having no credit simply means there is no record to demonstrate how you handle debt and repayment. Bad credit, on the other hand, shows evidence of managing debt poorly, such as late payments, missed payments, over-borrowing, or failing to repay debts.[2] For this reason, securing a home loan is more difficult for those with bad credit than for those with no credit.   

Mortgage Options and Strategies for Homebuyers with No Credit

If you don’t have established credit, here are a few home loan options and mortgage application strategies to consider to help you qualify for a home loan. 

Manual Mortgage Underwriting 

Mortgage underwriting is the process of evaluating potential borrower risks and mitigating those risks by tailoring the terms of the loan. This process is often automated, using pre-determined criteria to automatically assess the risk of loaning funds to borrowers. However, some lenders may offer manual underwriting, in which an underwriter personally reviews a borrower’s complete financial situation.[3]

If you lack a traditional credit history, you may provide proof of on-time payments and responsible money management for manual underwriting, such as:

  • Rent payment history
  • Utility bills (electric, gas, water, phone, and internet)
  • Insurance premiums (auto, health, and renters insurance)
  • Bank statements and investment account statements showing consistent income and savings habits

Using a Co-Signer with Strong Credit

Some lenders may be willing to accept a co-signer to help homebuyers with limited credit secure a home loan. A co-signer is a person who agrees to be held financially responsible for the repayment of the loan if the borrower defaults or fails to make the loan payments as agreed.[4] By offering another layer of assurance to the lender that the loan will be repaid, the lender may be able to relax their qualification criteria, including credit score minimums. 

Co-signers may need to have exceptional credit and a strong financial profile to qualify to co-sign a loan.[4]

Préstamos FHA 

FHA loans are backed by the Federal Housing Administration to make homeownership more accessible. By insuring these loans, the FHA alleviates some of the lenders’ risk, allowing lenders to issue home loans with lower down payment requirements to American borrowers without strong credit scores.[5]

Importantly, you must have some credit to be considered for a home loan, but with some lenders accepting credit scores as low as 500 with a 10% down payment (or 580 for a 3.5% down payment), you may be able to establish enough credit to qualify for an FHA loan very quickly.[5]

Ways To Strengthen Your Mortgage Application Without Credit

Without a credit score to help lenders assess risk, you may need to show a stronger general financial profile, which can be done by:

  • Saving for a larger down payment. A larger down payment reduces the loan-to-value (LTV) ratio, reducing the financial risk for the lender and potentially allowing them to relax their credit score requirements. 
  • Holding assets. Assets may strengthen your mortgage application because they can be liquidated for cash to repay the mortgage loan if necessary. If you have acquired property, securities, or other valuables, make sure your lender is aware of these assets.  
  • Maintaining a lower DTI. Your debt-to-income (DTI) ratio measures your monthly debt obligations as a percentage of your pre-tax income. A lower DTI typically indicates less risk of default, as the income is enough to cover the debts along with standard living expenses.   

Quick Ways To Build Credit Before Buying a Home

Establishing even a little bit of good credit may make it easier to secure a home loan. While it may take years to build strong credit, you may be able to establish some good credit in as little as a few months with these quick credit-building tips:[6]

  • Become an authorized user on someone else's credit card. If the primary cardholder has a long history of on-time payments and low balances, that positive credit history may be added to your credit report, often in just 30 to 60 days, helping you establish credit quickly without taking on your own debt.
  • Get a credit card and use it strategically. Credit cards (including store cards) are often easy to get and help you build credit by establishing a history of on-time payments when you use them regularly and make prompt payments. Use the card for expenses you already incur, like gas or groceries, and pay the balance in full each month to avoid interest charges.
  • Ask if your rent and/or utility payments can be reported to the credit bureaus. Your lender and/or utility providers may have a system in place for reporting on-time payments to the credit bureaus, which could establish your credit record.

How To Apply for a Home Loan

Getting a home loan is a multi-step process that often begins even before house hunting:

  • Paso 1: Apply for pre-approval. Mortgage pre-approval is when a lender reviews your finances to determine whether you are likely to qualify for a home loan and how much you may be able to borrow. This critical step informs your budget so you shop in the correct price range, while also strengthening your future purchase offer by assuring the sellers that you are likely a financially qualified buyer. 
  • Paso 2: Complete the loan application once a seller has accepted your offer to purchase their home. This step includes providing detailed, up-to-date information and documentation about your finances and employment. 
  • Paso 3: Work with your loan officer until closing. Your mortgage loan officer (MLO) is in touch as the underwriter completes their due diligence to make sure you qualify for the loan. This may include multiple calls to your employer to confirm employment as well as requests for more recent financial statements as closing day approaches. The loan is funded just before closing on your new home, making sure the money is ready to be transferred to the escrow agent or seller as outlined in the purchase agreement.   

Final Thoughts on Buying a Home Without Credit

While buying a home without credit isn't the easiest path, it may be possible with the right preparation and strategy. If you're committed to homeownership but don’t yet have a credit history, focus on strengthening your financial profile, including your income, savings, and payment history, and explore lenders who offer manual underwriting or accept co-signers. 

You can also invest in building your credit while house hunting. Using credit cards wisely, getting your on-time bill payments reported to the credit bureaus, and being added as an authorized user to a well-established credit card may all boost your credit profile quickly, potentially making it easier to qualify for your new home loan. 

Interested in learning more about what is required to qualify for a mortgage loan? Connect with a PNC MLO today by calling 1-(855) 744-2268. Our MLOs will walk you through the requirements and help answer any of your questions.