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Can you buy a house with no credit? Yes — here's how.
For most borrowers, your credit score (and credit history) play a significant role in your ability to buy a house. A good credit score typically makes the process easier and more affordable, while a poor credit score does the opposite.
But what if you have no credit score at all?
It’s a problem over 45 million Americans have, according to the Consumer Financial Protection Bureau. While not having a credit score can certainly make buying a home more challenging, it shouldn’t preclude you from becoming a homeowner entirely.
Do you lack a credit score or a deep credit history? Here’s how it could impact your home-buying options.
In this article:
Credit’s role in buying a house
If you’re buying a home in cash, your credit typically won’t come into the equation. But if you need a mortgage loan to finance the purchase, credit plays a large part.
That’s because most mortgage programs (and lenders) have minimum credit score requirements you must meet. For FHA loans, it’s 500 to 580 (depending on the size of your down payment). For conventional loans, you’ll typically need a score of at least 620.
Mortgage lenders also look at your credit history, such as how often you’ve been late on payments and how long you’ve had accounts in good standing, when evaluating your loan application. These factors speak to how risky you are as a borrower and how likely you are to make monthly mortgage payments.
Usually, a high credit score and a long history of paying your bills on time will make it easier to qualify — and often get you a lower interest rate too. A low score or history of late payments will typically make getting a mortgage harder and increase your interest rate.
Learn more: Buying a house with cash in 6 simple steps
Bad credit vs. no credit
To be fair, having bad credit isn’t the same as having no credit. With a poor credit score or a track record of late payments, lenders see you as relatively irresponsible with your money and the loans you take out. With no credit, it simply means you have less experience with borrowing cash, which is not necessarily a negative.
The problem is lenders have no way to gauge your risk without a credit history to use as a reference. How likely are you to make your payments? How responsible are you with your money? You’ll need to address these things to qualify for a mortgage loan.
How to buy a house with no credit
Fortunately, there are ways to buy a house without a credit history. It takes being strategic, though, and you’ll want to plan for your home purchase well before it’s time to make an offer.
Here’s what you’ll need to do:
Pick the right mortgage lender
The first thing you’ll need to do is choose the right lender. Some lenders specialize in serving non-traditional borrowers: those who don’t work traditional 9-to-5 jobs or who lack a strong credit history. They may even offer specific loan products for these cohorts.
Smaller lenders, like local credit unions, may also have more leeway in who they can loan to, so you’ll want to look at various mortgage providers before choosing who to apply with. Some national lenders, such as New American Funding, make qualifying with no credit score easier.
Dig deeper: The best mortgage lenders for bad credit
Choose the right loan program
The loan program you choose matters too. For example, FHA loans typically require a 580 credit score to qualify. However, if you don’t have any credit history at all, the Federal Housing Administration allows you to use non-traditional sources to prove your ability to pay — things like past rent payments or proof of paid utility and insurance bills. This could make it easier to qualify.
There are also non-qualified mortgages (also known as non-QM loans), which often allow you to qualify for your mortgage without the typical credit or financial paperwork. Another option is asking lenders about loans that allow for manual underwriting. This is when an underwriter verifies your financial capabilities step by step instead of using automated computer algorithms, as lenders do with many types of mortgages. Manual underwriting can help you qualify when you may not be the picture-perfect borrower on paper.
Offset the risk
Since you don’t have a credit history or credit score to prove your financial responsibility, you’ll want to show the lender you’re a low-risk borrower in other ways, if possible. This could mean offering a substantial down payment. In this case, the lender has to loan you less and, therefore, has less money on the line if you default.
You could also consider bringing in a co-signer on your mortgage loan. A co-signer agrees to share the responsibility of the loan with you. If you fail to make payments, they‘ll need to step in and do so on your behalf. (If you go this route, just make sure to choose a co-signer with good credit. This will make qualifying easier and potentially get you a lower interest rate.)
Read more: How to get the lowest mortgage rate possible
Build your credit
Finally, consider building up your credit before applying for a mortgage. You can do this by getting a secured credit card (a deposit-based card that allows you to build up your credit over time) or a credit-builder loan. This small loan is designed to be paid back over a few months or years, with each payment getting reported to credit bureaus to gradually increase your score.
Getting a retail credit card, such as a gas station card or card for a local department store, could also help. Just make sure to keep your spending low and to pay off the balance quickly and on time. Any late payments will only hurt your credit in the long run.
Learn more: The credit score needed to buy a house
Buying a house with no credit FAQs
How can I buy a house with no credit?
To buy a house with no credit, you’ll need to be careful about which mortgage lender and loan program you choose, as some make the process easier than others. Choosing a loan with a manual underwriting option can often help, as can a non-QM loan. You can also work on building your credit up before applying for a loan, offer a larger down payment, or bring in a co-signer to help.
What options are there for home loans for a first-time home buyer with no credit?
FHA loans can be a good option for a first-time home buyer with no credit, as they allow you to use non-traditional sources to prove your ability to pay. For example, you might use copies of past rent checks or proof of your last two years of monthly car payments to qualify. Non-QM loans, which don’t adhere to the same credit and financial standards as conventional loans, are also an option.
Is it possible to buy a house without a credit score?
Yes, buying a house without a credit score is possible, though it can be more challenging. If you have no credit and want to buy a home, you’ll need to shop around for your lender, choose the right loan program, and consider making a larger down payment or bringing in a co-signer to offset the risk your lack of credit poses.
What is the lowest credit score to buy a house?
FHA loans technically allow for credit scores down to 500, as long as you make at least a 10% down payment. However, these are just the minimums the FHA sets, and lenders can set standards higher than this if they wish.
This article was edited by Laura Grace Tarpley.
