If you have a non-traditional credit history and a low debt-to-income ratio, you may be able to qualify for a mortgage. The key is to understand the types of loan programs available, and to make sure you have the right documents in place to prove your creditworthiness.
First things first: what is a non-traditional credit history? Generally speaking, it’s one that doesn’t include traditional lines of credit such as car loans, personal loans, or credit cards. A non-traditional credit history may include utility payments, rent payments, cell phone bills, and other types of alternative payment histories.
The good news is that there are plenty of loan programs out there for people with non-traditional credit histories. Here’s how to get started:
1. Check Your Credit Score: Start by checking your credit score. You can get a free copy of your report from the three major reporting bureaus (Experian, Equifax and TransUnion). This will give you an idea of where your score stands and whether or not you may be eligible for certain loan programs.
2. Look Into FHA Loans: An FHA loan is insured by the Federal Housing Administration (FHA) and is designed to help people with low or moderate incomes purchase a home. FHA loans are available in 30-, 20-, 15- or 10-year terms and typically require lower down payments than conventional mortgages do. With an FHA loan, lenders also look at alternative forms of payment history – such as rent payments – when evaluating eligibility for the program.
3. Consider VA Loans: A VA loan is backed by the Department of Veterans Affairs (VA) and provides financing for veterans who might not qualify for conventional mortgages due to their income level or lack of established payment history. VA loans also require no down payment and can provide up to 100 percent financing depending on the borrower’s situation.
4. Try USDA Loans: If you live in an area eligible for rural development funding from the U.S Department of Agriculture (USDA), then you may qualify for one of their loan programs specifically designed for those with low income levels or who lack established payment histories. These loans offer 100 percent financing with no down payment required and are available in 30-, 20-, 15- or 10-year terms depending on the borrower’s needs and situation.
5. Get Preapproved: Once you know what type of loan program you might qualify for, it’s time to get preapproved by a lender so they can evaluate your financial situation further and determine if you meet their requirements for approval based on your specific circumstances. During this process they’ll consider factors like income level, debt-to-income ratio, employment status and more before deciding whether or not they think you’re qualified to receive a mortgage from them specifically based on their own criteria/standards/guidelines/etc.. To do this they’ll likely request additional documentation such as proof of income/assets/etc..so make sure that all your paperwork is in order prior to meeting with them so that everything goes smoothly!
6 Develop Good Financial Habits: Finally, make sure that any financial decisions that you make moving forward will help improve your overall financial health rather than harm it – i.e., don’t overextend yourself with unnecessary purchases; create an emergency fund; pay off debts promptly; save for retirement; etc.. Doing all these things together will help ensure that when it comes time to apply for another mortgage later down the line it’ll be much easier since lenders will already have confidence in your ability to manage money responsibly!