No credit check home loans come in several different varieties, which I’ll discuss below. With the economic realities in today’s housing market, getting a home loan with good credit is far from being an easy task. For someone with bad credit, this doesn’t mean you can never get a home loan of any kind. No it does not. However, a potential homeowner who is seeking deals like assumable loans or wrap-around mortgages faces huge obstacles.
One of the major obstacles is much higher interest rates in all but one scenario. Just locating the possibility of acquiring one of these loans is challenging, but not impossible. When you’re looking for the best way to get a no-questions-asked mortgage, here’s what to look for.
Any FHA loan closed before December 14, 1989, or any VA loans closed before March 1, 1988, are fully assumable with no credit check. This sounds great. In reality however, those properties carrying these loans are very difficult to find. In addition, the buyer is going to have to put a very large amount of money down. If a potential buyer can locate one of these properties in which the loan was acquired right before the cutoff period, there is a greater chance of being able to make this type of purchase. Sometimes, with a very large down payment, the seller of such a piece of real estate may be willing to carry a second lien for the potential buyer at a much higher than market rate.
A seller would have to be very motivated to sell their property to consider this because when one of these old existing FHA or VA mortgages is assumed with no credit check, the seller is not able to obtain a release of liability. This means that if the new purchaser does not pay or defaults on the loan, that seller is still liable. It’s risky for the seller, but if your employment or income is good and verifiable, and personal references are good, then there is a good chance for obtaining this type of home loan.
The wrap-around mortgage is a type of home loan, typically done when no credit check is able to be used for loan qualification, where a lender (the seller), assumes responsibility for an existing mortgage. For example, if the seller’s loan on his existing home is $100,000 and he wants or needs to sell the home, on his own, for $150,000, he can allow a buyer to pay him $50,000, or any portion of that. If he is willing to carry a second lien, the new buyer assumes the responsibility for both the existing mortgage and whatever portion of the down payment that the seller has agreed to finance. The major problem existing here is that it is risky for the seller.
Since all but the loans referenced in the paragraph above are not assumable, except with a credit check and release of liability for the seller, if the lender becomes aware of this transaction, they can enforce the “due on sale” clause in the seller’s mortgage documents. The risk for the buyer is that they don’t receive clear title because this is technically not allowed by the lender.
Wrap-around mortgages, which are sometimes known as “all-inclusive loans”, have been around for a long time. They are not, however, for the feint of heart. If the seller checks out all aspects of the buyer’s employment, references, etc. and is willing to take the risk for higher returns and a definite sale, and the buyer is willing to take the risk that the seller is honest and he will ultimately obtain a clear title to the property when the existing lien is paid off, then it is an option. Both parties should have a real estate attorney involved to draw up the closing or selling documents and advise them of the risks inherent in this type of transaction.
Direct Lenders And Hard Money Loans
These are loans made by individuals or groups who specialize in what is basically, sub-prime lending. You will not find them through traditional channels. The assumption, which is usually the reality, is that the potential borrower has extremely bad credit with no hope of getting it “fixed” anytime in the near future. These types of home loan lenders will require a very large down payment. They will check your employment as well as sources of income and assets to determine your ability to repay them.
The biggest factor is that you will be charged an extremely high interest rate which could vary from approximately 16% to 25% plus or minus. Such lenders are protected because they hold the mortgage or lien on your property and have been paid a large down payment. If you pay your payment they make huge profits. If you don’t, or for whatever reason, can’t make your payments, they simply foreclose on your loan and sell the property to someone else, usually making a profit in the process. This is a very expensive way to acquire a home loan, but you can do so without a credit check if you want to go that route.
Typical Seller Financing
This is just a simple case of a seller owning a property free and clear, who for whatever reason, needs or wants to sell it and hasn’t been able to. More of this type of financing will be seen in today’s market because of the difficulty for even people with decent credit to be able to obtain a home loan.
Seller’s will typically do their due diligence in checking out the borrower, require a large down payment, and higher interest rates than a mortgage company, but nothing remotely approaching those of hard money loans. If you can find a willing seller, this is absolutely the best way to go, as closings take place in the normal manner and clear title is guaranteed.
The seller has the option, if you don’t pay, of foreclosing and reselling the property, so he has virtually, a minimum amount of risk.
If you are 62 years of age or older, a no credit check home loan is relatively easy to get. Reverse mortgages allow this age group with enough equity in their home to pay off their existing loan and create a new mortgage lien regardless of income or credit. Though the fees can be high, as long as you only use an FHA approved and backed reverse mortgage lender, this product can be a lifesaver. Potential borrowers are required to receive counseling on all aspects, fees, pros, and cons of this loan, so that they can make an informed decision. It allows seniors to tap the equity in their home and live there with no payments other than property taxes, insurance and upkeep of the home, until they either sell the property or die.
If the house is sold and the initial reverse mortgage is paid off, proceeds from the sale can be used for the purchase of a new, perhaps smaller residence. Again, no income or credit requirements apply. This is a very unique product that received a lot of bad press in past years due to the predatory practices of some non-FHA reverse mortgage lenders. Many revisions have been made to this product and it accounted for about 40% of new mortgages last year for those 62 years of age or older.