Mortgaging a home without a credit check sounds like a pie-in-the-sky notion, but it’s more common than you think. Guaranteed mortgages usually are REO homes. REO stands for “real estate owned“, which is a term for houses in which the bank or lender had an unsuccessful sale at auction. The main reason the sale failed in the bankruptcy process is the property costs more than it’s really worth, when you add up the outstanding loan, accrued interest, and closing costs.
In this case, a house buyer can swoop in and obtain the mortgage without many of the hassles you normally would face. Having cash helps, of course. In fact, unless you pay with cash, mortgages obtained without a credit check are rare. Virtually any real estate broker or homeowner wanting to sell is going to want to know if the person buying is going to be able to pay for the property. Most people who come to this site are not likely to qualify, because we deal with low FICO scores.
The honest truth is: if you want to buy a home while holding bad credit, your chances decrease. That doesn’t mean it’s impossible, though fewer programs exist than a few years ago, because of the busting of the sub-prime real estate market.
Buying a house with a pile of debt is going to require more effort on the part of the borrower. Since these scenarios are often many people’s only shot at owning their own home, the purpose of this article is to discuss the subject. There are a myriad of reasons why you may need to secure a home loan in these circumstances, but not many explanations for why you’re asking a home seller to trust you’ll pay your mortgage.
Believe it or not, you aren’t unique. Whatever odd story you have to tell, others are going to relate. Each person selling a house is going to be in a different situation. When you begin to discuss their cares and concerns, you might find you can address those needs and make a deal. People purchasing a home often don’t listen when their real estate broker tells them the key information they need. They’re too busy focusing on their own needs.
Those trying to buy using cash are going to need to be particularly perceptive, because they face long odds. If you currently have no verifiable income, or have a great income coupled with a poor credit score or credit history, you will find it difficult to keep the mortgage broker from laughing you out of his office. If you own your own business, especially if the venture is relatively new, you may have a high enough income to secure a mortgage, but you may not be able to prove your income history or have the proper documentation required by your average neighborhood mortgage lenders.
If you came into wealth or did very well in the stock market at an early age, then proving your credit worthiness might be harder than you expected. If you have a new stream of income (like a young professional athlete ready to earn millions of dollars), the prospects of proving your wealth requires special attention to detail. It might require extra time and effort before you are approved.
In short, you’ll need to throw open your books in a way you might not feel comfortable in doing.
Falling short of that, you’ll need to pay in cash. Maybe you won’t need to pay for the house outright, but you’ll need to make a particularly impressive down payment. Saving up a war chest is going to make the process go much more smoothly. Savings almost always help a person when making a big purchase. That’s probably not telling you anything you don’t already know, but it bears repeating.
Of course, people with massive amounts of cash always have options the rest of the population don’t. If you don’t have stacks of money to expedite the process, here are your options.
Guaranteed Home Loans with Bad Credit
With no credit history, or a poor credit score, you’re going to need a no credit check mortgage to buy your own home. Unless you’re lucky enough to have enough cash on hand to purchase a piece of property outright, you’ll have to look for a home loan you can secure without a credit check. Unfortunately, mortgage lenders won’t want anything to do with you unless you have proper proof of income and a solid credit history. If you don’t have either, it can feel impossible to secure a home loan.
Stop worrying — there is hope for those who want a mortgage but don’t want to undergo a credit check in the process. Most no credit check home loans aren’t as easy to get as loans secured with a proper income history, but you will be able to get that mortgage you need and purchase your house. You will certainly have to do more legwork to find a mortgage lender that is willing to loan money to you without performing a credit check, but if you want to get out of the rent trap and start earning equity on your new home, no credit check mortgages are worth the wait.
To understand why it is harder to secure a no credit check home loan, let’s look at the mortgage process from the lender’s perspective. It is much easier and less expensive for a lender to assess your ability to repay your mortgage if they can check your credit. Also, a mortgage made based on a credit check is more accurate in terms of their investment. All lenders are interested in your ability to repay the money they lend you, and a typical mortgage can run into the hundreds of thousands or even millions of dollars. The more difficult it is for the lender to decide if you can pay their money back or not, the higher the interest rate you’ll typically pay for the mortgage will be. You can still get a mortgage if you don’t want the lender to run a credit check, however you should be prepared to pay more interest than with a standard credit-checked home loan.
In addition to a higher interest rate, no credit check mortgages come with another surprise — lenders who allow you to borrow money without running your credit will require a larger down payment than you’d expect with a traditional bank mortgage. It is possible that you’ll luck out and end up with an interest rate similar to what you’d expect from a traditional mortgage, but you will certainly have to put at least 20% of the value of the property down to secure your no credit check home loan. The larger your down payment is on the property, the lower the risk is for the mortgage lender. If the lender ever needs to foreclose on your property, they will at least have your down payment equity to recover their own costs. A foreclosure is not just a loss for you, it is a major loss for the lender. Besides the fact that the lender will use your down payment as equity against a foreclosure, lender’s know that the larger down payment you are able to make, the less likely you are to default on your mortgage. Again, all of these inconveniences are about the lender insuring against the risk of foreclosure and losing money on your contract.
Rebuilding Your Credit
For your part, you will have to do most of the work. Plan on approaching many different lenders in order to find one willing to provide you with a no credit check home loan. Besides merely finding a lender willing to extend you a line of credit without a credit check, you should sop around to get the best interest rate and fee structure that is possible for your home loan. When shopping for a lender, be it for a credit or a home loan, shopping around is a good approach to take. It is a good financial practice to be able to compare the loan package offered from several different lenders, especially in the case of no credit check mortgages, which are often the largest extension of credit an individual will need. Let’s be honest — lenders know their customer’s options are limited with no credit check home loans compared to their conventional mortgage customers. Frankly, many of these lenders “see you coming”. Mortgage lenders know they can charge you a higher interest rate, a bigger down payment, and a less attractive fee package, because they see you as a desperate customer.
Don’t give up in your search for a no credit check mortgage. There are lenders that can turn your dream of owning a home into a reality. Regardless if you work directly with a mortgage broker, or choose a mortgage search service that looks at mortgages from several lenders, you will do yourself a favor if you compare what you are offered from multiple sources of lenders. They key to getting a guaranteed home loan is to research where bankruptcy auctions and home financing meet. Look for an REO yourself.