Can You Get a No-Credit-Check Mortgage?
If you have no credit or bad credit, it’s still possible to qualify for a home loan.
A no-credit-check mortgage is one way to get approved for financing without having a traditional credit history and score.
So if applying for a new home loan feels intimidating because you have less-than-ideal credit, it doesn’t have to be — you just need to know your options. Here’s a look at what to expect from the process and the loan programs you can consider.
- Borrowers without a credit score may still qualify for conventional and government-backed mortgage programs using alternative payment records.
- Borrowers who qualify for a loan using an alternative credit report may have to meet a higher bar when it comes to other mortgage requirements like down payment amount, debt-to-income ratio or mortgage reserves.
- Lenders typically verify nontraditional credit using bill or rent payment histories, but they’ll need to be payments that can be confirmed by a third party or financial documents.
How to get a ‘no-credit-score’ mortgage
There are three pathways you can follow to get approved for a mortgage without providing a credit score:
1. Get a co-borrower
A co-borrower is someone who agrees to share legal responsibility for your loan and its timely repayment and, typically, also shares ownership of the home with you. (A cosigner, on the other hand, is usually only involved to help you qualify for the loan and doesn’t co-own the home.)
If you have a co-borrower who will contribute more than 50% of the qualifying income, in some cases a conventional loan lender may completely skip considering your credit — but it’s not guaranteed.
2. Show that you have a history of on-time payments
In many cases, lenders will accept alternative credit histories if you don’t have the types of accounts that show up on the credit bureau reporting systems. This nontraditional credit history usually involves verifying your payment history on other obligations you’ve had over the past 12 months.
Keep in mind that this alternative payment history must be spotless. If there’s anything derogatory on your report, like unpaid utility bills or child support, in most cases you won’t be eligible for alternative credit options.
Below we’ll cover the details of which loan programs allow you to replace a traditional credit check with an alternative that evaluates your payment history.
3. Choose a hard money loan
Hard money loans are short-term loans often used by house flippers or other borrowers who just need a short-term loan of six to 24 months, and they come with much higher rates than traditional mortgages.
Hard money lenders often skip the question of credit altogether, since their loan approvals are largely based on your collateral’s value rather than your financial profile. This is great for borrowers with bad credit or no credit, but it’s also crucial to understand that a hard money loan typically isn’t going to be a good replacement for a traditional mortgage.
How alternative credit histories work: Proving you’re creditworthy without a credit score
Here are the major things lenders look for when evaluating a nontraditional credit history:
Absent a credit score, a lender may be most interested in how you’ve managed your rental payment history. Lenders often see the most recent 12 to 24 months of rent as a big indicator of whether you’re likely to pay a new mortgage on time.
Some lenders may ask you to provide documentation like your lease agreement, checks you paid your rent with or bank statements showing your payments.
If you made cash payments, you typically can’t use that payment history because there’s no paper trail.
Explore whether it’s better to rent or buy a home with our guide.
Another sign lenders look for is that you’ve paid utilities at your current residence on time over an extended period. Again, you’ll likely have to show proof, like checks or bank statements.
The utility bills likely have to be registered in your name to be usable.
You may be asked to show proof that you’ve made on-time payments toward two to three bills that aren’t necessarily related to your housing, like cell phone, cable TV, car insurance or life insurance bills.
Any type of account that you pay monthly may be acceptable for the additional credit items, but the exact amount of time you need to have made those payments and which payment types are acceptable is up to your lender’s discretion.
How lenders verify nontraditional payment histories
Lenders often order an Anthem report, a type of nontraditional credit report, to help verify your payment history. This will generally only work if the accounts in question are verifiable through a third party.
Your lender will let you know if an Anthem report (or another type of alternative credit report) is necessary, and will ask you to provide the name, contact number and account information for your alternative credit accounts.
Loan programs that allow for mortgage approval with no credit score
There are lenders and mortgage loan programs that cater to low- and even no-credit-score applicants. These programs typically only allow borrowers to purchase a primary residence — no second homes or investment properties are allowed.
| Loan type | Minimum credit score | Possible to qualify with no credit? | Who it’s for |
|---|---|---|---|
| Conventional loans | 620 | Borrowers who don’t need to borrow more than the conforming loan limit for their area. | |
| FHA loans | 500 | Borrowers who want to make a small down payment, or whose credit is too low to qualify for a conventional loan. | |
| VA loans | No minimum | Veterans, active-duty service members and their qualifying spouses | |
| USDA loans | No minimum | Borrowers who:
|
Click the headings below for an in-depth look at how these programs handle potential borrowers without a credit score.
Conventional loan programs do allow for approvals if you don’t have a credit score, but there are additional restrictions.
Down payment minimums
10% to 20%, depending on the lender’s guidelines
3% on Fannie Mae’s HomeReady® loans
5% on Freddie Mac’s HomePossible® loans
Mortgage reserve requirements
Up to 12 months’ worth of payments as reserves, depending on the applicant
DTI ratio maximums
36% (versus 50% for borrowers with a traditional credit score)
Private mortgage insurance (PMI)
Your PMI premiums may be more expensive if you’re approved with nontraditional credit.
The Federal Housing Administration (FHA) insures FHA loans with more flexibility around credit scores and DTI ratios. It also allows for nontraditional credit histories, although the requirements are slightly different from conventional mortgages. These requirements include:
A nontraditional credit report
The FHA requires an independent third-party credit to verify any nontraditional credit information that you provide. All credit providers, including your rental reference, must be verifiable — if you rent from a family member or friend, you’re not eligible for the loan.
In most cases, you’ll need to provide a 12-month payment history from three sources. At least one of them must appear on the following list:
Rent
Telephone service
Gas, electricity, water, television service or internet service
If you need more sources to round out your three, the FHA will also consider the following:
Insurance premiums that aren’t deducted from your payroll (renters insurance, life insurance)
Child care payments
Payments on a leased car
A personal loan from an individual rather than a bank (the loan must have written terms)
School tuition
Retail store credit cards
Rent-to-own furniture or appliance payments
Payment on medical bills not covered by insurance
12-month documented history of regular cash deposits into a savings account that were made at least quarterly, don’t include nonsufficient funds (NSF) penalties and weren’t deducted from a paycheck
A personal loan with terms in writing and a 12-month payment history at a regular, set amount
The payment history can’t reflect late payments in the last 12 months and no more than two 30-day late payments in the last 24 months on all other provided account histories.
Down payment minimum and DTI ratio maximum
Borrowers with no credit score need to meet the same down payment and DTI ratio requirements as borrowers with traditional credit scores:
The standard down payment minimum is 3.5%, while the standard DTI maximum is 43%.
FHA mortgage insurance
One advantage of an FHA loan is that your FHA mortgage insurance payment doesn’t depend on your credit score. That’s a notable difference when compared to conventional loans, which come with higher mortgage insurance premiums if a borrower has a lower score.
Tip: Mortgage reserves can help you qualify for an FHA loan
If you can show at least three months’ worth of mortgage reserves, you may gain a little more flexibility on some of the other requirements, including credit score. Ask your loan officer about qualifying using “compensating factors,” and whether they apply in your case.
VA loans, which are backed by the U.S. Department of Veterans Affairs (VA), make homeownership possible for eligible military borrowers. The VA doesn’t set a program-wide minimum credit score, since it recognizes that many recently discharged veterans may not have a credit history. Because of this, VA loans have a well-developed system for approving veterans with no FICO Score.
As long as a borrower can provide proof of recent rental history and additional payment records — showing, for example, a history of payments on utilities, car insurance or other expenses — the VA permits a lender to approve their loan application.
That said, VA loan lenders have the freedom to set their own guidelines, and some are stricter than others. You may need to shop around to find a compatible lender.
VA funding fees
VA loans come with funding fees, which function similarly to mortgage insurance. However, funding fees aren’t calculated using your credit score, so you won’t end up paying more if you qualify with nontraditional credit.
The U.S. Department of Agriculture (USDA) offers USDA loans to homebuyers in low-income areas of the country, usually in rural locations. One of the best features of the program is that there’s no down payment requirement.
Like FHA loans, the USDA will allow borrowers to obtain a loan with no credit score. Lenders prefer a traditional credit report in most cases, but will use two to three alternative credit references to evaluate an applicant’s credit if needed. Those alternative sources must show a 12-month payment history, and the credit source must be verified independently (payments made to family members don’t qualify).
USDA guarantee fees
USDA loans don’t have mortgage insurance impacted by credit scores. Instead of mortgage insurance, USDA loans charge guarantee fees at a flat rate to all USDA borrowers regardless of credit score or lack thereof.
Frequently asked questions
In the eyes of a lender, having bad credit is very different from having no credit. An individual with no credit score is simply someone who hasn’t held credit-based and/or bureau-reported accounts in the past. These consumers lack an official score even though they may have demonstrated financial responsibility for years.
Having bad credit, on the other hand, typically involves a history of making late payments, holding delinquent accounts or carrying high balances. A borrower with bad credit has failed to meet their financial obligations, and this makes lenders nervous.
Need to check on your credit score? See it now for free with the LendingTree app. You can also get personalized credit-boosting tips delivered straight to your inbox.
- You use cash instead of paying for things with traditional credit accounts
- You’re young and haven’t built credit
- Your household’s expenses are paid for through or by a family member
- You haven’t used credit in the last 24 months
- You’re a recent immigrant to the country with no U.S.-based credit history
Mortgage underwriting typically requires you to document your income with pay stubs or W-2s, but it’s possible to get a mortgage without this information. “No-documentation” or “no-doc” mortgages can help people with nontraditional or undocumented income get a mortgage loan, but they can’t be used for residential mortgages and require you to have significant assets, a strong credit score and a large amount of cash.
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