Guide to Home Loans with No Credit

Posted by in Loans | Updated on June 8, 2023
At a Glance: Getting a mortgage without a credit score is possible through non-traditional lenders who use alternative methods to assess creditworthiness. You can establish a payment history through rent reporting services and provide proof of income and payment history for other expenses. Options include FHA mortgages, smaller lenders, and credit unions. Making a sizeable down payment reduces risk and interest rates. Ensure affordability by considering additional expenses and maintaining an emergency fund.

Do you want to buy a home? Are you looking for the perfect place to raise your family? Or are you just in the market to buy a property? If so, do you know how you’ll purchase the real estate?

Immigrants and people living on a visa have a hard time getting access to certain financial services like mortgages and loans. How can someone without a credit history get access to credit? Don’t fret, because we know of a way in which you can possibly qualify for home loans for no credit. This is what you need to know.

How to Get a Mortgage with No Credit Score

You could still get a mortgage without a credit score. Lenders nowadays have more than one way to verify your creditworthiness. If you find the right lenders you can possibly qualify for home loans for no credit. You just need to comply with the simple eligibility criteria.

Traditional lenders like banks often refrain from helping immigrants and undocumented people with credit. But non-traditional lenders like credit unions and online lenders are willing to help. They have alternative ways to still determine your ability to manage credit.

Let’s look at a few ways in which you can still prove your financial wellbeing. You could still qualify for an undocumented immigrant home loan.

Using Your Payment History in Place of a Credit Score

A credit history helps prove your spending habits and other related financial behavior. Lenders want to know about your financial wellbeing before they offer you any credit deals. But how can you prove your history if you have no credit score?

You can use your payment history at different places where you actively keep an account up to date. Rent reporting services can help prove your payment history. Most rent reporting services also report your payments to credit bureaus. These reported payments then help build a credit score.

Not all rent reporting services report to every credit bureau. You need to report your payments to all credit bureaus in the U.S. to increase the believability of your credit score. Lenders check your credit score at more than one credit bureau to verify your creditworthiness.

Dave Ramsey, personal finance expert and host of The Ramsey Show, explains that it’s not impossible to get a mortgage without credit, but “You’ll need to show verification of your income for the last 12–24 months, as well as a steady payment history for at least four regular monthly expenses.”

Even if you don’t have a credit score yet, you may still be able to qualify for home loans for no credit. Find the right lender (like an online lender for instance) who uses alternative ways to calculate your creditworthiness. It gives you more options to choose from. Shop around and get more offers to find the best and cheapest mortgage.

Mortgage Options for People with No Credit

Do you know what types of mortgages you need to look for? Did you know there is more than one type of mortgage? Here are a few options you can consider:

  • FHA Mortgage
  • Small Lendder
  • Credit Unions

Each is for a different scenario and one of them may fit yours.

FHA Mortgages

FHA mortgages are a viable option. It can help people who have no or very low credit to still get a mortgage. The Federal Housing Administration (FHA) offers these loans through approved lenders.

The eligibility criteria for these mortgages are much more lenient. The minimum required down payment for this type of mortgage is much lower than the average conventional home loan. The minimum down payment could be as low as 3.5% if you have a credit score of 580.

This may help you to get a mortgage but beware, FHA loans are very expensive. The interest rates could be higher than other mortgages. It’s also a bit risky to take a mortgage with a low down payment. A little later we’ll look at reasons why a well-sized down payment is actually a good thing.

Smaller Lender

Smaller lenders like online lenders could be better suited to helping you. Some smaller lenders are geared to help the underserved. They have a better understanding of your needs and could offer you the best help you can find. Just because they are smaller doesn’t mean they offer a service of a lesser standard. In fact, their size could be their advantage. Smaller lenders are more adaptable and could help create services and offers that suit your needs. They could offer a good no credit home loan.

Credit Unions

Credit unions serve their members. Only specific people can qualify for a specific credit union. Hispanic immigrants can, for instance, become a member of a Latino credit union. The union can perhaps help them with credit offers that could help to purchase a home.

Credit unions could be a good option as opposed to traditional banks. They serve specific communities and therefore understand the exact type of needs experienced by that group. A credit union serving Latinos will understand the challenges uniquely experienced by the Hispanic community.

The Importance of a Down Payment

As mentioned earlier, a down payment is a very important part of a mortgage. It may work in your favor if you could make a sizeable one. But why is it so important?

A sizeable down payment reduces the amount of debt on your mortgage. You are essentially making an upfront deposit payment on the property. Which means the remaining value of the home is the value of the debt. The lender’s risk is reduced since there is less debt on the mortgage. Mortgages with sizeable down payments have lower interest rates as well. Less debt equals less risk for the lender. They can then offer you a lower interest rate.

Ramsey explains, “Normally, we recommend a down payment of at least 10% to 20% of the home price. But if you have no credit score, aim for 20% or more since it reduces the lender’s risk and demonstrates your ability to handle money responsibly.”

A down payment helps cheapen a mortgage. The down payment itself requires cash, but the effects thereof are profitable. A lowered interest rate reduces the rate at which interest accumulates. Your monthly payments are cheaper and you could possibly settle the mortgage faster.

A down payment also acts as a type of barrier to fluctuations in the property market. A down payment helps reduce the value of the debt on your home. It will be bad for your financial well-being if your home’s value falls below the value of your mortgage. This means you’re repaying a debt that is worth more than your home. A down payment helps reduce the probability that your home’s value can fall below the value of your mortgage. But how much should a down payment be to capitalize on its benefits?

3 Simple Steps to Applying for a Mortgage Down Payment Loan

If you are considering applying for a personal loan for a mortgage down payment, just follow these 3 simple steps.


Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.


If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon you’ll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.


The loan then gets disbursed into your U.S. bank account within a reasonable number of days (some lenders will be as quick as 2-3 business days). Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.

How Much Should You Put Down?

As seen previously with FHA loans you need at least a minimum payment of 3.5% of the home’s value. But otherwise, there is conventional consensus that a mortgage needs a 20% down payment. This helps reduce the risk of property price fluctuations and it will reward you with all the added benefits of making a sizeable down payment (like cheaper interest rates).

You’ll have to speak to your lender and ask if 20% is enough. Some borrowers may be required to make a larger down payment before they qualify for a mortgage. It depends on your creditworthiness and the policies of your lender.

Be Realistic About What You Can Afford

Finally, remember to be realistic about what you can afford. You should make sure you have an emergency fund and enough to cover essential expenses on top of your mortgage payment.

Paula Pant, a personal finance expert and real estate investor, also recommends that you consider other non-obvious expenses, as well. “Maybe you have family overseas and you send them remittances. That’s not the type of thing an underwriter will screen for but that’s a responsibility you have that will take a bite out of your budget.”

If you plan well, research all of your options, and are able to convince lenders that you can afford payments, you should be able to get a mortgage even if you don’t have credit.

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