So my husband & I are in the process of trying to get preapproved for a home loan. Problem is, is that we don't have any "revolving" credit. We worked really hard to pay off debt. We don't owe anyone anything other than our monthly expenses... no credit card debt, no car loans, nothing.
When a mortgage company pulled our credit report to give us an approval amount, it showed 0 for all three scores on both of us. We are looking for a company that will work with us on getting preapproved for a home loan. We don't want to go out & get a credit card to try to build credit, cuz we worked so hard to elimate that debt (plus my husband is on the Dave Ramsey plan). I know lenders are just looking to see a score & tell yes or no or how much.
Anyone know of a company that will help us? We are currently saving so that we have extra savings in the bank & also some kind of down payment.
Thanks in advance! :-)
Though this may not sound logical, a credit score is based not on "can you pay the loan" but "have you paid your previous loans". High income and no debt still doesn't provide evidence of your paying behavior.
I have a very low income right now, but an excellent credit history, and was able to lease a new car based on that. I don't know how to get around a non-existent credit history, other than to create one.
What about finding a mortgage broker? If you know and TRUST any realtor you could ask them if they have any recommendations.
Good luck!
Former mortgage lender and underwriter speaking:
This could be REALLY hard! Though it's good that you have zero debt, BRAVO...sure wish I could say that! It's important to still have activity prior to applying for a loan. IE: Keep one credit card account open, if you don't want debt or even to use it, pay one consistent auto withdrawl bill with it every month and then just pay it off-create activity.
I would say your best bet is going to be a small town, local bank that you've done business with-if this is the case. They can create a history for you and possibly step outside the lines a little, particularly if they keep their funding in house. But, you need a history with them, accounts, loans, etc to create enough of a picture of collateral if you will. This isn't always the case, but I worked for a family owned bank for several years and for VERY loyal customers-we board approved this once or twice...still very rare, you need a relationship with the bank and they need control over their lending-which is hard to find.
Any larger bank or mortgage lender or 3rd party who purchases the loan and approves the loan based on their guidelines is going to want to see credit of some sort-you've got to have a score, period. Sad to say, that's the catch 22 of credit, you need to have a history of it, but you need to be responsible with it.
You might have to put it off for 6 months-a year and create a credit history again-which is going to mean probably 2-3 accounts being active, not carrying balances, but being used. If you had car loans, credit, etc in the past-they should be able to still see that and use it-unless it's been say over 5 years since you paid everything off and used any kind of credit or loan.
So sorry, I know-quite frankly, the rules suck. Talk to the loan officer too, there may be some new tricks, I've been out of the field for a couple years now.
Good luck to you!
Your best option is your current bank. If it's a smaller hometown bank, you're a long term customer, and you have several accounts with them, they may be able to look beyond the trational approval process.
You could also try a mortgage broker, since they work with many banks and lenders they may be able to find a lender for you.
This also doesn't make any sense to me. You state "we worked really hard to pay off debt" and "cuz we worked so hard to elimate that debt", indicates to me that you had loans and/or credit cards in the past. These would appear on your credit reports and be part of your credit score. I have accounts that are 20 years old on my reports. Have you personally gotten your annual reports and reviewed them?
I also do not understand why you do not want to have a credit card. What's wrong with having a credit card, making 2 small purchases a month, and paying them off each month? This will give you a good credit score.
Good luck.
