Getting a Mortgage Without a Credit Score

We have been in this house for nearly nine years, and have added three more children to our family since we made that purchase. Three years ago we paid the house off.

Over the years, we have toyed with the idea of moving to a house that is slightly bigger. We have five children in a 4 bed, 2.5 bath, 2200 sqft house. Our guestroom seldom is used, so we could put one or two kids in there, but for now, the two older boys are in one room, the two girls are in another, and the youngest is still in our room waiting for the right time to transition to be in the same room as his brothers.

What has really started to become a problem is the bathroom situation, and will only get worse as we transition into the teenage years. I am sure we could make it work, but the thought of moving to a house just slightly bigger keeps coming up.

The downside with moving up in house is that we would have to have some money saved up. We would either need to sell our house, and have a sale contingency in place on the house we are moving to; do a short term rental while we wait for our current house to sell / finding the place we want to move in to; or we would need to take out a full mortgage on a second house, and the moment our current house sells take that amount and throw it at the new mortgage.

The thought of having a new mortgage is not a pleasant one, especially since we worked so hard to pay our current house off. But the reasoning might be - if we think we can get X for our house, and we take out a mortgage for say 125% of X for a new house, then the sale price of our house would go to pay most of that mortgage off. Or alternatively, we sell our current house, take out a small mortgage for the difference in the sale price and price of the newer home (something well under $100k).

To add to all of that, my wife and I both have no credit scores. We ditched our final non-mortgage debt over 10 years ago, and after not having a mortgage for three years, we have confirmed that we have non-existent scores. When you say that in the same of conversation about taking out a small mortgage, people think that is just not possible.

I recently called the mortgage company that we advertise for at work, Churchill, to see what options are available. Specifically, what it would take to either get a mortgage for 125% of our estimated house sale price, or something much smaller to make up the difference, without a credit score. Here is what I was told:

  • To qualify for a "conventional" loan, you must have a 20% down payment
  • For a FHA loan, the down payment is closer to 3-4%. But, you have to pay PMI
  • Depending on the down payment, you need 3-5 verifiable lines of payment for 12+ months, in the name of the people applying for the loans. This could include gas, water, electric, TV service (but not Hulu / Disney plus, etc), cell phone service, and the like. Basically, things you could pay via a check.
  • You might be able to get a way with switching a service - for example switching from ATT to Verizon for cell service - but you need to show a continuous 12 months. But, maybe right now is not the time to consider switching to save a few bucks.
  • There can be absolutely no negative things appearing on your credit report. No late payments (for a medical bill, for example), no collections, don't go saying "I am not going to pay this thing until they remove this one line item because they did it wrong" and risk going into collections.
  • They will look at your tax return for your sources of income, and will want, depending on the type of work (W2 vs 1099, etc) to see 1-2 years working for the same company. If you are self employed, that will be two years. The person I spoke to had talked to people who quit their day job to grow their personal gig, only to find out they no longer could get a mortgage due to insufficient history.
  • There was one bit I didn't get clearly since I was in the car, but wasn't really applicable - there is a $450k limit, but I was not sure if that was for FHA or conventional. For our county, the FHA's website currently shows a limit of about $580k for a single family home. Other internet searches show that "conforming" loans from Fannie/Freddie currently have a limit of $510k. What is crazy is that their map shows that Metro Nashville have an increased limit - $563k. The rest of the midwest, save one county in the Atlanta area, has the lower $510k limit, so I suppose this shows how crazy the Nashville housing market currently is. The next closest area to have this higher limit is Richmond, VA.

These were all very reasonable requirements, and should we go down that route, it looks like getting a mortgage with no credit score should not be an issue. Even if we don't need to get a mortgage, it was good to hear that yes, it is possible to go this route, dispelling yet another myth around needing a credit score.


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